The secret sauce of good growth stocks (and 2 that tick all the boxes)

Given interest rates remain at decade-long highs, and hopes of cuts continue to be pushed out into the future, it may be surprising for some that growth companies have continued to go from strength to strength. 

The S&P/ASX 200 Growth Index, for example, has risen 7.76% over the past 12 months. In comparison, the S&P/ASX 200 Value Index has lifted just over half of that at 4.71%. 

According to OC Funds Management's Aaron Yeoh, this is because a lot of companies have readjusted to a higher interest rate environment and have had a closer look at their cost bases, meaning earnings are now more sustainable for growth companies. 

 

Similarly, Datt Capital's Emanuel Datt believes it's because valuations within small-cap growth opportunities still remain compelling compared to their large-cap counterparts, and in addition, can help investors earn higher returns to keep up with or exceed inflation.  

So in this episode, Livewire's Chris Conway sat down with Datt and Yeoh for their tips and tricks for identifying good growth companies on the ASX. 

They analyse the financial factors, management requirements, and competitive advantages that they believe are important to winning growth stocks, and each select a stock that ticks all these boxes and more. 

Note: This episode was recorded on Monday 6 May 2024.