What not to do when choosing growth stocks
According to Armbruster, it is important not only to buy correctly, but also to sell correctly. The manager proposes to get rid of the shares if the company's f
According to Armbruster, it is important not only to buy correctly, but also to sell correctly. The manager proposes to get rid of the shares if the company's fundamental valuation has changed. This approach explains why fast-growth stocks are falling hard, even if they fall just short of analysts' expectations.
“We don't like to average. A growing company can continue to fall before value investors get into the stock,” Armbruster said.
Pay attention to fundamental analysis
At the same time, the manager advises leaving companies with temporary, solvable problems in the portfolio. As an example, he cites DocuSign, which promotes digital signature technology. Between the start of the pandemic and December 2021, the company's stock has roughly tripled. And on December 2, DocuSign published its quarterly report. Revenue and profit were better than expected, but the forecast for the next quarter fell short of analysts' estimates. DocuSign's stock fell 40% that day.
This is how Armbruster explains the company's results: “The sales department didn't need to look for potential customers. They just had to pick up the phone. They seem to have become overconfident. And when the phone stopped ringing, the company was unable to regain its level of sales. But DocuSign still has a competitive advantage. The value of a digital signature is clear.”