Growth.
That’s the name of the game.
Price-earnings (PE) ratios, book value and all the other fundamental nonsense are essentially worthless.
(If you missed yesterday’s update on the right way to use PE ratios, click here now.)
Wall Street wants to see companies growing their sales and earnings…
It wants to see more dollars coming in the door…
And as soon as the growth trend slows down, Wall Street is no longer interested.
It’s easy to guess what happens next…
They dump the stock.
Don’t believe me?
Let’s take a look at Beyond Meat (BYND) for a perfect example…
From Darling to Dud
After going public in early 2019, BYND quickly became a Wall Street darling.
Investors pushed it higher by a massive 432% in just three months.
Sales were surging, and investors expected that trend to continue.
Then, suddenly, the growth stopped…
Sales flat-lined.
The valuation models used by institutions were pricing in high double-digit growth every quarter.
That’s what justified such a high stock price.
But when those models were revised to reflect slower growth and lower expectations going forward, the stock began to appear highly overvalued.
So they sold it. Fast!
BYND fell 70% from its highs almost as quickly as it shot up.
And those investors who bought into the hype are now sitting on large losses.
The Fundamentals That Matter
I’m not a fundamental trader by any means.
But I do recognize that sales and earnings growth are crucial.
The best-performing stocks will almost always post big sales and earnings numbers.
As soon as you see those numbers dip and fall short of expectations, start looking for the exit.
Remember… We want to date stocks, not marry them.
We only want to hang around for the good times.
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
