Growth stocks are doing well

The Baltimore Sun

Growth-stock investing, which focuses on companies whose earnings are expected to accelerate at an above-average clip, isn't playing favorites this year.

It is scattering its success stories all over the place, as indicated by the divergent tales of two hot stocks each up more than 70 percent this year.

The first, MasterCard Inc., boasts nearly one-third of the world's credit cards, a processing network with room to grow and strong profit. Although it faces lawsuits on charges such as anti-competitive behavior, this also underscores its presence in the global payment industry. Archrival Visa International also is making plans to go public.

The second, Canada-based Research In Motion Ltd., is a mobile-data-services powerhouse that has 9 million subscribers for its BlackBerry and recently added China as a market. Though speculative, it has a strong balance sheet, with new models Pearl and Curve enhancing its attractiveness. The stock is splitting 3-for-1 in August.

"Growth is taking place this year across most industries and all market capitalizations, the only exceptions being housing, banking and pharmaceutical stocks," said Tom Jacobs, co-founder of Complete Growth Investor newsletter in Marfa, Texas. "Some of the hottest stocks this year are well-established businesses, not tiny players that may come and go as the wind blows."

As proof that no growth-stock size has been left behind, mid-cap growth funds are up 17 percent this year, small-caps are up 14 percent and large-caps 12 percent, according to Lipper Inc. Each slightly leads its counterpart size in value funds, which seek bargain-priced companies trading for less than inherent worth.

Although the stocks can be volatile, no one can say big technology lacks growth potential. Apple Inc. is up 62 percent this year, global-positioning-system device company Garmin Ltd. has risen 48 percent, and Intel Corp. is up 28 percent.

But while a number of large stocks have had impressive growth, smaller stocks historically outperform larger stocks by about 4 percentage points on average per year, Jacobs said. That can add up over time.

That is why he recommends Key Technology Inc., a small-cap firm that is a leading designer and manufacturer of automated sorting and processing machines for the food industry. Its stock is up 67 percent and has growth potential, he said. It has strong cash flow and a backlog of orders for its systems that aim to improve quality and reduce cost.

Another Jacobs favorite is AmTrust Financial Services Inc., a property and casualty insurer specializing in worker's compensation insurance for small to medium-size businesses.

The stock is up 132 percent this year, and the company increased its dividend 25 percent. It also agreed to acquire Florida-based worker's comp insurer Associated Industries Insurance Services Inc. for approximately $41.2 million.

yourmoney@tribune.com

Andrew Leckey writes for Tribune Media Services.

Copyright © 2021, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
72°