Driehaus' Growth & Momentum Investing: A Roller-Coaster Ride

by Wayne A. Thorp

Momentum investors seek companies with rapidly growing earnings and prices to match. The hope is that continued earnings growth will attract additional investors who will continue to bid up the stock price.

That investment philosophy, centered on earnings growth, underlies the approach used by Richard Driehaus, who was one of 25 money managers named in the year 2000 to the Barron’s All Century Team. He and his firm, Driehaus Capital Management, look for companies with strong and accelerating earnings growth. Their belief is that earnings growth is the primary driver of stock prices, as sustained earnings growth allows a company to increase cash flows and dividends. In his book “Investment Gurus” (Prentice Hall, 1999), Peter J. Tanous outlines Driehaus’ momentum strategy.

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