Some characteristics those prime growth stocks should have

The Ticker

April 11, 2001|By JULIUS WESTHEIMER

HOW DO you pick the right growth stock? "Prime growth stocks should meet these characteristics," says John Train, author of "Preserving Capital." "A dominant position in a growth industry. A long record of rising earnings and high-profit margins.

"Superb, aggressive management. Commitment to innovation and good research. Ability to pass on cost increases to the consumer. Strong financial position. Relative immunity to competition, consumerism and government regulation."

SALES ARE CRUCIAL: "What constitutes a growth stock? Earnings matter, of course, but not nearly as much as revenues," says Better Investing. "Legitimate growth companies generate solid top and bottom-line gains, while pretenders hit their profit targets, but without significant sales increases.

"The pretenders - Wm. Wrigley Jr. Co., Gillette Co., Coca-Cola Co. and Campbell Soup Co. - often succumb because strong profit growth eventually becomes impossible without similar increases in revenues."

STOCK SUGGESTIONS: "Don't believe everything you read. ... Don't get `suckered' into buying a stock because everyone says you should. ... Beware broker `churning.' ... Read newspaper business sections and annual reports carefully. ... Do some bargain hunting. ... Keep the word `risk' in mind." ("The Everything Money Book" by Rich and Kathi Mintzer, $12.95 and worth it)

WALL STREET WATCH: "The market does what it will. It is our job to recognize potential market junctures in real time, not in retrospect, and then to handle them intelligently and decisively." (Robert Prechter, the Elliott Wave Theorist)

"Expect short-term interest rate cuts, maybe to 4.4 percent by year-end. Sometimes rates have a big impact, but this time not. We haven't had a real credit crunch, so rate cuts will have a tiny effect. Stick with bonds and cash." (Kenneth Fisher, money manager)

"While many quality convertible bonds trade at a large premium to their conversion value - what the bonds would be worth if they were exchanged for stock-some are abnormally cheap." (Anne Cox, vice president, Merrill Lynch & Co. Inc.)

"Despite the current slump, the average annual return from stocks over 75 years has been over 10.5 percent vs. 5.5 percent on bonds." (CNBC-TV)

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