A growth manager is a type of money manager who focuses his or her attention on the purchase of shares of stock. As part of the process, the manager will pay close attention to the difference between the share price and the earnings accrued per share, a figure that is commonly known as a price/earnings or a P/E ratio. The idea is to maximize the return on the stock purchases made on behalf of the client by positioning the client to enjoy favorable returns on the investment for a specified period of time.
A growth manager will often consider a stock purchase that has either short-term or long-term growth potential. For the short-term approach, the manager will identify and secure for the client any options that show a solid promise of increasing in value over the next twelve months. The idea is to purchase the shares while they carry a relatively low price per share, then sell them just before they level off and begin to decline. This allows the investor to enjoy the returns generated during the upswing, without incurring any type of losses when the stock’s momentum begins to wane.
Along with identifying stocks with excellent short-term earnings growth, the growth manager will also look for stocks with high earnings potential over the long term. Here, the focus is on finding stock options that will generate a consistently solid return for anywhere from two to five years, or even longer. These types of assets help to serve as the foundation for an investment portfolio, providing security for the investor over the long term.
In order to accomplish these goals, the growth manager must be able to identify and properly interpret the indicators connected with both a given stock, and the general movement of the markets where the stocks are traded. This means doing research into the past history of the stock, the stability of the company that issues the stock option, and the potential for the company to not only maintain but grow over a specified period of time. This data must be combined with understandings about the general state of the economy, any potential events that could derail that market momentum, and the impact that new trends in the marketplace are likely to have on the value of the investment.
The successful growth manager is able to find the right investments, purchase them at exactly the right time, and sell them when they begin to show signs of losing value. This means that the work of the manager does not stop once the stock options are acquired. By planning carefully, the manager is able to maximize the earnings growth for the client, reduce the potential risk to the investor, and in general make sure that the stock found in the investment portfolio is likely to continue to earn well for as long as necessary.
