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High Growth Stocks For 2014

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Focusing On High Growth Stocks For 2014 For Greater Returns

High Growth Stocks

While growth investing is not suitable for all investors, for those who like to invest aggressively without taking excessive risk, investing in high growth stocks for 2014 is one way to potentially increase investment returns in 2014.  High growth stock investing involves finding companies that are expected to experience a period of rapid growth in earnings over the next year or several years, and buying their stocks in anticipation of the growth, since Wall Street usually rewards companies that report fast growing earnings with higher stock prices.

Finding high growth stocks to invest in for 2014 is not particularly difficult.  Do a search for companies expected to experience high rates of earnings growth in 2014 and beyond.  Companies expected to grow earnings by 20% or more over the next year are consider high growth.  The faster the earnings growth the better, especially if it is expected to continue beyond 2014.

High Growth Stocks For 2014

Not all high growth companies are the same, since some may already have high valuations.  Look for companies that have a price-to-earnings ratio (P/E ratio) of less than 30, based on reported earnings over the past twelve months. To measure whether a high growth company is over or undervalued, look at its Price/Earnings/Growth (PEG) ratio.  The PEG ratio is calculated by taking the P/E ratio for a stock and dividing it by the company’s expected earnings growth rate over the next twelve months.  The lower a stock’s PEG ratio, the more undervalued it is based on current the P/E ratio and expected earnings growth.  Stocks with a PEG ratio under 1 are considered undervalued and make for good high growth investing candidates.  The lower the PEG ratio, the better. Low PEG ratio stocks have good potential to experience a high rate of growth in earnings over the next twelve months and a corresponding increase in stock price.

Ideas Regarding High Growth Stocks For 2014

There are a wide variety of high growth stocks for 2014 that may be good growth stock investments during 2014 and beyond.  Companies to focus on for high growth investing have earnings estimates that are expecting earnings per share (EPS) to increase by at 20% or greater during 2014, while trading for less than 30 times trailing 12 month earnings.

The following are some high growth stock ideas for 2014:

  • Energy companies such as Peabody Energy (NYSE: BTU) and Cabot Oil and Gase (NYSE: COG), Rowan Companies (NYSE:  RDC), Halliburton (NYSE:  HAL), Devon Energy Corporation (NYSE:  DVN), and Nabors Industries Ltd. (NYSE: NBR).

  • Industrial companies such as Alcoa (NYSE: AA), Baker Hughes (NYSE:  BHI), and Cummins Inc. (NYSE: CMI)

  • Home building and financial companies such as Lennar Corporation (NYSE:  LEN).

  • Specialty retailers such as Michael Kors Holding (NYSE:  KORS)

  • Travel companies such as Priceline (NASDAQ:  PCLN)

  • Biotechnology and healthcare companies such as Gilead Sciences (NASDAQ:  GILD), Celgene Corporation (NASDAQ:  CELG), and Tenant Healthcare (NYSE:  THC)

  • Entertainment companies such as Discovery Communications (NASDAQ:  DISCA)

  • Technology companies such as Applied Materials (NASDAQ:  AMAT) and JDS Uniphase (NASDAQ:  JDSU).

Devon Energy Logo

As you can see from the above list of high growth stocks for 2014, certain stock sectors have numerous companies that are expected to report high rates of growth in earnings during 2014.   Energy companies that are involved in exploring for and producing oil and natural gas as part of the recent oil boom that has swept the United States and Canada in recent years due to advancements in drilling techniques have the most companies that are expected to report high rates of earnings growth in 2014.

Growth in the booming oil and natural gas sectors will be boosted further during 2014 and beyond by the recent approval by Mexico’s Congress of a bill that ends the decades long PEMEX state oil monopoly that prevented oil companies from the United States from investing in and generating revenues from Mexican oil and natural gas fields.  The move still requires further state approvals, but approval is expected and Mexico’s oil and natural gas fields should soon be open for business.  Much of the anticipated additional $20 billion per year of foreign investment in Mexico’s oil and natural gas fields is likely to come from United States based companie,s due to their close proximity and technological advantages.

Industrial, biotechnology, and healthcare companies also provide a number of high earnings growth investment ideas for 2014.  Since it is hard to know which sectors will be hot in 2014, a good strategy for high growth investing is to spread investments out among several high growth stock sectors.

Investing In High Growth Stocks For 2014 | Be Aware of The Risks

While the rewards associated with investing in high growth stocks can be considerable, it is important for investors to also understand the risks associated investing in high growth stocks.  High growth stocks can turn into momentum stocks, which take on a life of their own, as momentum traders bid them up to unsustainable valuations.  While this can be a good thing for a growth investor, since the shares rise in price, investors have to be careful not to get caught up in momentum trading, when their basis for investing is high growth stocks is rising earnings driving the share price higher, rather than momentum.  If a high growth stock has gotten well ahead of reasonable earnings expectations and valuation due to momentum traders taking over, the conservative approach would to lock in your profits by selling your shares or at least enough to cover your initial investment.

Two other risks associated with growth stock investing are the risk that company earnings do not materialize as expected or the entire stock market experiences a slump.  High growth stocks can experience a steep drop in price, if earnings miss growth expectations, because fast earnings growth is what the market is expecting.  A stock market sell-off can pull down high growth stocks that have gotten extended in price even faster than the overall market.  To invest in high growth stocks for 2014 cautiously, use stop-loss limit orders to sell high growth stocks, if they fall below specific price support levels.

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