Every investor would like to select the stocks of companies that will do better than the average over a period of years . A growth stock may be defined as one that has done this in the past and is expected to do so in the future .
Thus it seems only logical that the intelligent investor should concentrate upon the selection of growth stocks . Actually the matter is more complicated , as we shall try to show .It is mere statistical chore to identify companies that have " outperformed the averages " in the past . He has a guaranteed-successful stock portfolio ????? There are two catches to this simple idea .
The first is that common stock with good records and apparently good prospectus sell at correspondingly high prices . The investor may be right in his judgement of their prospectus and still not fare particularly well , merely because he has paid in full and perhaps overpaid for the expected prosperity .
The second is that his judgement as to the future may prove wrong . Unusually rapid growth cannot keep up forever ; when a company has already registered a brilliant expansion , its very increase in sizes makes a repetition of its achievement more difficult . At some point the growth curve flattens out , and in many cases it turns downward .
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