Growth Investing

Jenna,

I have been following AAII's A+ Growth Grade project since it was first previewed by Wayne in his article "Segmenting Growth stocks with the G-Score" in September about a month before the 11/1/22 launch of the AAII's A+ Growth Grade product.

As you may have noticed from the skeptical vibe of all my past posts, I paid attention when Marvin Gaye counseled us (all) in 1968 in "I Heard It Through the Grapevine," about how to handle new information, "… believe half of what you see, son, and none of what you hear ..." That is very danceable advice, and it has served me well in many situations. (Admit it, you are humming that tune right now and maybe even foot-tapping. I'll wait.)

It sounded like an opportunity that could syncopate the steady beat of the value strategy that has served me well in 2022.

So, I educated myself by downloading EVERY article on the AAI website about growth stocks. I found 17 dating back to "Finding Growth Stock Winners, 8 Fundamental Factors" from 2008 and 3 others before the 2022 pre-launch publicity campaign to educate us on AAII's A+ Growth Grade product and Partha Mohanram's G Score methodology.

I found 16 articles by Mohanram on Google Scholar and 8 more that debated the merits of G Score. The AAII's A+ Growth Grade launch was where and when I first heard the name, Partha Mohanram. The surfacing of a "new guru" – in Canada no less -- piqued my curiosity. I haven't seen a Canadian financial prophet  (the other kind of "profit") since … well … since never. My investigation surfaced dozens wannabe Canadian financial guru acolytes on Twitter. For me, this episode reinforced the wisdom of Marvin's "half of what you see" lyrics. (Still humming along, huh?)

I read up on Mohanram and the etymology behind the G Score concept. G Scores derive from the same "Gold Rush" mentality to find a way to quantify market "anomalies" –  the name for a "factor" that "beats" the returns of a specific index, usually the benchmark S&P 500. Fama and French, only and El ride away from AAII, say they found five, one of which is growth. That's a good sign to start on

The outcome of my fact-checking?

The new Canadian "pledge" Partha fits right in with the other "brother" gurus at the AAII "Alpha Alpha Iota Iota" house – like Ben Graham (Intrinsic Value), O'Shaughnessy's (EV EBITDA), O'Neil's (CAN SLIM Gro & Mo), Kirkpatrick (Rel EPS Growth), et al.

Briefly, the AAII Growth Investing program uses two processes to identify growth stocks. (#1) AAII's A+ Growth Grade screen identifies high-quality, sustainable growth stocks for the long term. Then (#2) Mohanram's G-Score system ranks them using 8 fundamental financial measures (many from the 2008 AAII Article) to "rack and stack' candidates into a 20-stock portfolio.

Wayne has put in a lot of work on this. It's an important project for AAII.

AAII is at the top of my "Trusted Advisor" list. (My wife s #1.) after all this background fact-checking, I am still interested.

I do have lengthy comments/suggestions (what else? Being "fully expository" is my "vibe." It paid for all my degrees) to many of Wayne's recent articles promoting AAII's A+ Growth Grade. I will not reprise them here.

My personal take is:
Is the timing, right?

(++) Many companies have hordes of CASH to invest in CapEx and advertising, two of the key drivers for G Score.

(- -) Lots of data (the top two to me are that the VIX > LT bear market average and the UST2/UST10 yield curve is inverted about 50 basis points) has not run its course. That suggests to me that the "smart money" thinks the Fed FFR rate will make borrowing more expensive.

Do you have enough "free" CASH to invest?

(++)  You have enough cash in your portfolio to buy into AAII's A+ Growth Grade @ $149-$199 per year and fund 4-6 of the 20-stock portfolio.

(- -) You don't have cash, and you have to sell some investments that might be DOWN due to the 2022 bear market, the worst in 50 years. That's a big decision.

What are the "BLACK SWANS" that could make the US economic situation WORSE?

I will let you fill in your "top-of-mind" favorites here. After all, anything I would say or write would be subject to being screened by your own Grapevine filter. (Humming again? Don't even think about "How Sweet It Is (To Be Loved By You)" or "What's Going On?" and anything with Tammi Terrell.)