Investing in Exponential Growth
Eric Brynjolfsson’s and Andrew McAfee’s book The Second Machine Age was the spark that initiated my search for exponential growth.
Select here for a brief illustration of exponential growth.
How do we help investors to discover stocks with exponential growth potential?
First, every day we scan the trading activity for more than 8,000 stocks. Our proprietary filters identify stocks with extraordinary percentage increases in both PRICE and VOLUME.
This screening metric is our “trigger” or discovery metric. It’s virtue can be expressed in the following quote from Warren Buffet:
“Writing a check separates commitment from conversation.”
This metric identifies the fact that savvy investors – typically institutional investors – were doing more than conversing – they were writing checks.
Second, we eventually determined that a further screening metric was required to ensure that a company was on a path of exponential growth. That metric became the plotting of year-over-year quarterly revenue growth rates.
Companies that display a consistent pattern of double-digit year-over-year revenue growth rates are strong candidates for exponential growth.
Finally, the main question remaining is the sustainability of those growth rates. That question can best be answered by learning more about two vital metrics: What is the company’s Total Addressable Market and what is the company’s Unique Competitive Advantage? Specifically, we recommend that investors carefully read the company’s 10-Q and 10-K reports filed with the SEC, as well as the Quarterly Earnings Call Transcripts, including the Q&A at the end of each presentation.
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