The ideal growth candidates are most often found in emerging markets. The rewards can be enormous for investors able to pinpoint the eventual winner in a growing but still-fragmented industry, such as early investors in Dell Computer, Microsoft or Wal-Mart were able to do.
Those opportunities are hard to find, and the next best growth candidates are firms offering unique products or services to existing markets, with a history of consistent earnings growth and expanding profit margins.
The worst growth candidates are those selling into markets where price is the main differentiator between competitors’ products or firms that are not the number one or number two players in their market.
Growth investing is not about buying low. ...