How do you pick Growth Stocks?

I’ve now got into a routine with the passive 90% of my portfolio with a mixture of global stock ETFs and bond ETFs. I’ve also started to pick a few growth stocks with some of the remaining 10%. I’ve picked a few of the usual suspects discussed here (Greatland, SMT, Arrival, Technology Minerals, Twilio) and bought £10-15 each so far.

However as the amounts invested go up I want to get more serious about how I pick stocks and not just follow the herd. I’d like to:-

  • Mostly go for UK stocks, both to avoid fees and support local companies.
  • Go for companies with an innovation or technical edge.
  • Go for companies I understand, so probably not esoteric financial services!

However beyond that I don’t know much about reading the fundamentals of companies. How do you pick stocks? Is there a good guide to understanding the fundamentals and which of them is most important?

I’ve found Genuine Impact, ADVFN and Simply Wall Street; which seem to have a lot of data but picking out the right parts is a little daunting!

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I wouldn’t call any Greatland, Arrival and Technology Minerals Growth stocks. With reference to your comment about UK stocks and your SMT pick: note that SMT is not UK oriented - in fact its stance is that it is very difficult to pick UK stock that fits their investment thesis.

Arrival (the stock I know best of the ones you have mentioned) is a risk laden play. The comments about it on Freetrade tend to be “wishful thinking” oriented, mostly make use of company PR and tend to underplay problems/threats for the business. So a good adage might be “confirmation bias” is something to be thinking about. Of course it may pan out … doesn’t mean it is not a high risk stock.

If you do want to go for a UK “Growth” stock then I would suggest you research some of the Investment Trusts that have taken a recent pounding because they are Growth oriented see for example BGUK and BlackRock’s Throgmorton (THRG).

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I don’t even try, I just buy trusts, eg SMT for global growth, ATT for tech, NAS for small-caps, and so on. There’s an opportunity cost to picking stocks and I’d rather pay someone more qualified do it for me.

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I’ve got no delusions about beating the pros! I want to pick a few stocks for myself to learn more about business and to make sure I don’t fiddle with the main part of my investments…

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What would we call the likes of Arrival and Greatland Gold? “Moonshots”, “Hope over experience”? I can definitely see confirmation bias and believing a companies hype being a problem.

Good point about SMT; I don’t object to investing abroad but I’d prefer to keep things local for my own picks.

I hadn’t thought about using a fund’s holdings as a shortlist but it makes sense to me. Throgmorton holds some odd stuff though, I wouldn’t have had WH Smith down as a growth stock… I think I’ll go through the list and find some companies that could change the world and go from there!

That’s fair enough in terms of wanting to learn.

THRG is a small-cap trust rather than a global growth one. It targets the bigger end of UK small-caps.

You could do a lot worse than build a shortlist based on the holdings of UK small-cap trusts – such as BRSC, RIII, OIG, JMI, ASL, IPU and HSL – then use a stock screener to whittle it down.

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Thanks for the list of trusts, that’s enough to keep me going for a long time :sweat_smile:

Do have any suggestions for stock screeners? The one’s I’ve found seem to be either costly or US focused.

No worries. Be warned, finding UK growth companies will be like finding a needle in a haystack!

I haven’t used screeners in a while but I liked Yahoo’s free one despite it being a bit buggy. I can’t remember whether UK stock coverage is any good. It’s hard to fault Simply Wall Street, I have a couple of free accounts. I used Genuine Impact briefly; it’s by no means bad but I preferred the other two.

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You’re right about the needle in a haystack… I can’t see much out there in the UK that isn’t either a huge long shot or pretty steady. In the end I plumbed for two new stocks:-

  • Oxford Instruments - Make scientific instruments which feels like selling shovels to gold miners in today’s world! Are well established with a solid balance sheet and reasonable revenue and earnings growth prospects in the next few years.
  • Ceres Power - A riskier choice but I wanted to get in on the energy transformation business. Ceres aren’t profit making but they appear to be further along the road than ITM and other hydrogen businesses plus I like their licensing business model as it could scale up quickly.

Hopefully my thoughts on these aren’t daft! I’m planning to gradually build up a small holding in these over the next few months. Thanks for idea of using a couple of Simply Wall Street free accounts too, 10 reports a month should be plenty for me.