Traits to Look for in Growth Stocks
Robert Bartolo manages the T. Rowe Price Growth Stock fund (PRGFX), the oldest growth stock mutual fund in the United States. We spoke about what he looks for in a growth stock.
—Charles Rotblut, CFA
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Charles Rotblut (CR): As a portfolio manager, how do you define what constitutes a growth stock?
Robert Bartolo (RB): In terms of the objective for the T. Rowe Price Growth Stock fund (PRGFX), we basically look for bottom-line growth. In most cases that’s earnings per share , but in some cases it is free cash flow per share. Bottom-line growth of at least 10% is the “definition,” per se. Top-line growth is also very important to me as a growth investor, because at the end of the day, there are only so many ways a company can increase its margins—buy back stock and do different things. If a company wants to sustain really good bottom-line growth for a long period of time, it has to have a good, or at least a decent, top line.
CR: When you’re looking at the earnings growth, are you looking for 10% growth in earnings per share, net income or both?
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