Here’s how I find the best FTSE growth stocks


Investing in the best growth stocks of the FTSE has the potential to dramatically transform its wealth. And with markets looking distinctly grumpy right now, I’m more determined than ever to separate the wheat from the chaff. Here are some of the questions I asked when selecting stocks for my watchlist.

Best FTSE Growth Stocks: My Checklist

# 1. Does he have an advantage over his rivals? There is no point in buying one as well. To achieve real growth, there has to be a reason why clients / customers are flocking to the business rather than others. If I can find one, it’s even better to own a business that has very few competitors.

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# 2. Is the valuation reasonable? Getting a “good deal” is a good feeling. However, price should always be of secondary importance to the quality of a business, in my opinion. In reality, it’s actually hard to find the best FTSE growth stocks trading at cheap valuations. The key is to determine what a reasonable amount payable based on outlook. An initially high P / E is not necessarily a deciding factor.

# 3. Is there a path to growth? As a long-term fool, I have to be sure that a business’s income and profits will improve over time. This could be done by launching new products or by setting up in new geographic areas. But if there is nothing on the horizon, why buy?

# 4. Is the record good? It is rightly pierced in us that past performance is not a guide for the future. However, one rule of thumb I’m working on is that most winners, barring a huge misstep, tend to stay winners. Have the business fundamentals been in the right direction for years? If so, I will probably be interested.

# 5. How are the finances? The past 18 months or so have shown how important it is for a business to be financially sound. This is especially true with the best FTSE growth stocks, as they always invest in themselves to reap the rewards later. As a result, I tend to buy stakes in companies with little / no debt and avoid those with no margin of safety if things go wrong.

Patience required

Of course, this initial checklist comes with a few caveats.

First, even the best FTSE growth stocks can still become an absolute dog of an investment if events work against them. A global pandemic comes to mind.

The key here is to accept the inherent uncertainty in all of this. Investment rewards are not guaranteed and even the best in the business cannot predict the future. All I can do is try to increase the odds in my favor through detailed research and then looking for the best risk / reward trade-off based on my financial goals.

Second, a large company can still take a long time to play the way I want. It means to be patient. This is why, for example, I continue to invest in a fast-fashion company Bouhou even though its share price has fallen 44% in the past 12 months. Other than that, I think he still does all the right things.

Third, it’s worth pointing out that my initial criteria for determining what makes a great FTSE Growth Stock will differ from those of other investors. There wouldn’t be much of a market if everyone agreed on whether something was a buy or a sell!

Paul Summers owns shares in the boohoo group. The Motley Fool UK recommended the boohoo group. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.

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