Investing in Philippines: What are Growth Stocks

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Sunday, August 21, 2011

What are Growth Stocks

source: http://www.benzinga.com


Growth stocks are stocks whose earnings are expected to grow at an above-average rate relative to the market. A growth stock usually does not pay a dividend, as the company would prefer to reinvest retained earnings in capital projects.(source: www.investopedia.com)

As the definition above says a Growth Stock is a stock expected to grow at above average as compared to the PSEi so for an example we have PX(Philex Mining Corp.)

source: www.bloomberg.com
The above comparison tells it all. Sometimes growth stock companies don't declare dividends and re-invest earnings to fund expected growth. PX was once expected to slow down when its mine in Padcal, Benguet was said to mine out in the near future about 2012. But the recent findings that such mine will extend for more years geared PX to an expectation of more earnings that it even caught the attention of Manny Pangilinan leading to MPI's(Metro Pacific Investments) entry to PX.

Last year my investor friends and I established a TP(Target Price) of 21 pesos per share for PX when it was in the 12-14 pesos level. But today PX is now at 27 pesos level way above our TP.

With the mining boom expected to come back to the Philippines PX is expected more to rise up from its 27 peso level. Other mining stocks like LC/LCB, AT, and other are expected to peak up as well. When will that be nobody really knows yet but expectation of growth is there thus these stocks are called Growth stocks.

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Chitika