I have only found one way to get 25%/year when the market returns 10%. It is to buy stocks growing their revenue at enormous numbers, maybe 65%/year, that have a high gross margin. The valuation will be high, but not insanely high. Also, each quarter the revenue growth will be increasing. You also have to analyze the company, listen to the conference calls, etc. I know it works, because I have done it with a small amount of my money since 2019. Your whole portfolio will have about 8 stocks. You need to get out, once the story changes. There is a website where everyone exchanges ideas that I will provide a link to. You can look at people's performances and verify that it is accurate. It is a very risky strategy, and in 2022, it lost about 65%. https://discussion.fool.com/c/investment-analysis-clubs/saul-s-investing-discussions/29
Basically the rule of 40 right? The sum of a company's year-over-year growth rate percentage and its profit margin percentage exceeds 40%.
They look for stocks increasing revenue at sometimes 80%. Wy the method works so well, I don't really know, because it goes against my philosophy, but the person who started the group did between 25 and 30% per annum since 1990 or so. They publish their results every month, so the numbers are verified, including 2022, when they lost about 65%. The volatility of the stocks is like nothing I have ever seen.
I would not put more than a small amount of your money into the strategy, because watching yourself lose 65% in a year is painful. I sold my original investment, so I am playing with house money now.
I think where we're at now, there's a handful of software companies out there, names we all know, that initially soared, then crashed, and are now bouncing around the bottom of their 3 year range. Stuff like Twilio, TTD, there's several... and while they might not grow their top lines nearly as fast as they have going forward... I suspect many of these have turned the corner and what we are going to see now is their bottom-line EPS growing quarter after quarter. Software is the gift that keeps on giving, and with the layoffs etc, these companies are streamlining, but their products are already made, and the updates won't take nearly the cash burn that was required to develop the products and the sales pipelines to reach the point they are currently at. The markets change, and imo, those are the companies you want to find right now for the buy and hold. The ones that have just gone, or are about to, go gaap ebitda positive... buy them, ignore the quarterly noise, and forget you own them for several years. You'll do well.
Fine, I am BS and you are PhD. Because it assumes continuous perfect hedge, drift is cancelled out. Of course real life is not ideal.
Those were two of their companies when I joined the board. For a long time, they were only in SAAS companies, but then the world learned about saas, so now they doing other growth companies, ELF, and AXON, are two of them.