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The growth share hitting all the right notes

Only one share has managed to embrace the zeitgeist to pass a growth-focused strategy screen this year
May 6, 2020

In the long-running debate over the death of 'value' as an investment style, many proponents of traditional value strategies have suggested this investment approach would really shine during a sell-off. While it could still be early days in the current crisis, value has certainly not shined. This is reflected in the direction my strategy screen is taking this year. The screen looks to the most successful investment approaches of the past quarter to divine a way ahead for the coming 12 months. Spoiler alert: it's all about earnings growth.

A year ago, the three top strategies highlighted by the screen were high forecast earnings growth, earnings  upgrades and high return on equity. It proved a winning mix (two of the strategies are also in this year’s top three). Even with the FTSE All-Share tanking and delivering a negative total return of 16 per cent over the last three months, the six stocks that passed all last year’s tests racked up a positive total return of 16 per cent. Takeovers prior to the big market sell-off helped this bumper result as the way I monitor screen performance assumes any cash returned from takeovers sits on the sidelines until the screen is run again. A larger version of the screen that used weaker criteria to boost the number of ideas also delivered a creditable (in the circumstances) negative 3.9 per cent total return.

12-month performance

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