Growth and Securities
At these heights it should be clear that the analysis of securities has as much art as it does of science. It implies the use of mathematical techniques with an objective disposition, but it also demands the use of a series of subjective judgments.
To evaluate the capacity of a directive organ of a company and the future possibilities of a society or sector means that you have to issue subjective judgments about future developments and economical tendencies. The growth situations are more difficult to analyze than the asset situations because in the first one, you have to project yourself towards the future. While in the second one, you only analyze the present.
There is animosity in reference to the advantages of investing in assets or “investing in securities” in comparison with that which the growth investment offers.
To make a fast distinction between both types of investments, we will say that he who invests in growth is chiefly looking for the gains its capital can offer, while he who invests in securities is mainly looking at the degree of risk and in the greater or lesser possibility of having its capital refunded. The usual for a growth investor is to go after a high profitability and to be included to accept the undoubtful risks that come with the securities that can give you what you want.
In these last years the growth investment has taken the lead over the investments in securities and it has also obtained substantially more high rents. Growth securities give great expectations of revaluation, they are usually quoted at a superior price than the average so much as in its relation with the benefits as in relation with the dividends and the accounting value, and it is reasonable to think that they will keep on giving a superior profitability to that of the average of the market because:
- The creativity yields. In the actual times of economic expansion and technological advances, many of the most successful growth securities are from technological, scientific and commercial innovations that are usually less tangible, but have a greater potential for profitability than the material assets such as factories and mines.
- Audits count. Fast development companies barely pay dividends and its profitability rests in its capital gains. If these capital gains are not done in a short period, the maximum fiscal burden that they will support is of 20%; while dividends to which an ordinary type of rent tax is applied, have a burden of up to 39.6%.
- Results are trustworthy. There is trustworthy background information that says that the best growth companies give solid and stable benefits. Investors like that and they are willing to pay high PER prices to have in their portfolios this kind of securities. In seasons with low inflation and low types of interests, these shares are still more appreciated when by these circumstances the actual value rises and the investors can attribute for them future gains. This, however, can be a weapon with two edges, due that the investors will immediately penalize all the securities not situated at the same level of expectation.
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