Jensen, Auer Find Growth Amid Rubble
With corporate earnings collapsing these days, some growth funds are modifying their approaches.
Instead of straining to find stocks with rapid earnings gains, portfolio managers are settling for companies that are reporting little or no growth. But not all growth funds have shifted. Some managers are sticking to their rigid disciplines, combing through the stock universe to find the limited number of companies that are still reporting rich profits.
Consider Bob Auer, the consistent manager of Auer Growth (AUERX). Year after year, Auer only takes stocks that grow at an annual rate of at least 25% and sell for a price-to-earnings ratio of not more than 12. "We want to pay less and get more," Auer says.
The growth fund currently holds 202 stocks that have passed his screens. In recent years, Auer has owned as many as 250 stocks. The total slipped to 150 in 2002, a recession year.To find stocks, Auer considers 9,000 candidates, ranging from tiny companies with market capitalizations of less than $10 million to the giants of the S&P 500. Computers could do the work, but most programs are not as current as the news columns of The Wall Street Journal and Investor's Business Daily. So Auer relies on the newspapers and a pair of scissors. Every day he flips through the papers looking for quarterly earnings reports. Once he finds a candidate, Auer cuts out the article. Besides examining the earnings growth and P/E ratio, he also reviews the balance sheet to make sure the business is not about to go bankrupt. As a final check, he examines statements by the company. If the chief executive forecasts that earnings will fall, Auer stays away.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV