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?

Firstevery 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.

The virtue of this screening process can be expressed in the following quote from Warren Buffet:

“Writing a check separates commitment from conversation.” 

Our screens identify the results of savvy investors – typically institutional investors – writing checks.

However, the investment focus of those savvy investors might not be the same as our focus – identifying stocks with exponential growth potential.  Furthermore, although they represented the preponderance of our discoveries, we learned that exponential growth was not limited to information technology or biotechnology companies.

Second, we eventually determined that a further screening metric was required to ensure that a company was on a path towards 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 only question that remains is the sustainability of those growth rates.  That question can best be answered by learning more about the company and its target market.  Specifically, we recommend that investors carefully read company Quarterly Earnings Call Transcripts, including the Q&A at the end of each presentation.

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