We might say a word about the characteristics of growth and total return stocks, before we comment on how to spot a cyclical. The type of stock will define not only its fundamental source of expected returns, but also the quality of a company's earnings, the issue's susceptibility to market risks, the nature and stability of its earnings per share and dividends, and even the susceptibility of the stock to adverse market and economic conditions. NAIC investors generally pursue growth stocks with consistent revenue and earnings performance. We seek credible companies that we can understand. Such an approach is particularly helpful in selecting stocks that best fit specific overall investment objectives.
Growth stocks deliver consistently high rates of growth in sales and earnings.
They generally appeal to investors who are looking for attractive stock price appreciation rather than dividends. They carry a relatively higher level of risk. Most growth stock investors, however, view this added risk as completely acceptable in light of the relatively high potential returns that these securities offer. An effective growth stock investor will generally have a relatively long time horizon. Many NAIC investors invest in blue chip growth stocks.