You are here: Home - Saving & Banking - News -

Growth stocks increase in popularity

0
Written by:
18/01/2008

One of the most marked trends of recent months has been a shift in investor preference for growth stocks at the expense of value, according to European Assets Trust.

It says that broker analysts have been extrapolating forward healthy future earnings growth on swathes of cyclical stocks on the back of the last few years of strong growth.

Manager Crispin Longden said: “The result is that while these stocks appear expensive based on historic earnings numbers, they continue to look cheap on future estimates. That is, they are seen as having the characteristics of growth stocks.”

However, Longden believes the case for continued performance from cyclical stocks falls down in two respects.

He added: “First, analysts are wrong to draw from a company’s recent earnings history. They should delve back at least to the last cyclical downturn in the early years of this century or even further back given the relative mildness of the last downturn.

“Secondly, record order backlog figures reflect orders which have already been placed, not orders pending. They are lagging indicators. In certain cases, a lengthy order book may indicate problems in fulfilling client deliveries in the time schedule demanded, leading to over-run penalties. In other cases, the order might even be cancelled if economic conditions continue to deteriorate.”

Longden points out that it is relatively commonplace now to hear of lower levels of customer down-payment or even absence of down-payment on placing of an order.
This means that the client has less to lose by reining back or pulling out and that the supplier has to contend with a higher cash drain on working capital.

 

Related Posts

Tagged:

Tag Box

Debt

Pension

Spending

Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
FSA hands out record PPI fine

The Financial Services Authority (FSA), has dished out a seven-figure fine to HFC Bank for failing to meet required sales...

Close