Growth stock
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Both "Growth" and "Value" are labels put upon a stock or mutual fund by investors.
Usually they represent styles in investing - and not all stocks fit one category or the other. William Bernstein writes that, "Looking for cheap stocks is value investing. The opposite of this is growth investing". Value investing is easier to define and explain simple benchmarks for buying under that premise. For example, a low P/E ratio often is considered a signal that a stock is "cheap". An investor may buy that stock on just that signal alone.
The converse is not necessarily true. A "growth investor" does not usually buy a company simply because it is overpriced, but will usually look at how fast it is growing and what is expected in the future.
Many "value investors" will have considered their job over once they buy the stock. If they bought a stock for $10.00 that they believe is really woth $15.00, then they have already made their profit and hope in the long run the market will adjust their value accordingly.
Many "growth investors" will track their stocks more closely in order to be able to adjust their predictions based on new information.
[edit] References
- Bernstein, William. The Intelligent Asset Allocator. McGraw-Hill, 2001.
