Some
growth
stocks,
such
as
major
tech
companies,
had
a
mostly
good
run
since
the
start
of
2023,
but
their
performance
has
been
unequal.
The
“Magnificent
Seven”
stocks
have
mostly
been
driving
the
rally
in
the
S
&
P
500
.
In
fact,
growth
stocks
overall
had
“a
very
difficult
time”
in
2022
and
some
funds
have
not
made
a
full
recovery,
said
Nick
Griffin,
chief
investment
officer
and
founding
partner
of
Munro
Partners.
“We
had
one
of
the
biggest
growth
wipeouts
we’d
seen
since
the
dotcom
crash
and
a
lot
of
growth
managers
…
have
not
gone
back
to
their
previous
highs,”
he
told
CNBC
Pro
.
“What
that
does
is
it
cleanses
the
system
to
a
certain
extent.
So
why
did
the
wipe
out
happen?
because
interest
rates
went
from
zero
to
5%
really
quickly,
assets
got
revalued
really
quickly.
And
a
lot
of
smaller
competitors
lost
access
to
capital
altogether,”
Griffin
added.
How
does
he
identify
the
winners
among
the
huge
universe
of
growth
stocks
out
there?
Griffin,
who
manages
the
Munro
Concentrated
Global
Growth
Fund
and
the
Munro
Global
Growth
Small
and
Mid
Cap
Fund,
says
he
focuses
on
structural
earnings
growth.
That
is,
companies
that
increase
their
earnings
regardless
of
what
happens
in
the
economy.
“Because
that’s
a
better
chance
of
making
money
than
trying
to
work
out
what
the
economy
is
going
to
do,
which
is
hard,”
he
said.
“So
just
focus
on
companies
that
can
grow
somewhat
independently
in
the
cycle,
and
we
organize
them
into
these
areas
of
interest
or
themes.”
Some
companies
are
growing
only
because
of
macroeconomic
factors
such
as
improving
gross
domestic
product,
or
terms
of
trade
but
“don’t
necessarily
have
an
edge”
on
their
own,
added
Kieran
Moore,
also
a
portfolio
manager
at
Munro.
There
are
six
qualities
that
make
a
“great”
growth
company
which
can
double
their
earnings,
according
to
Griffin
and
Moore.
The
companies
should
be
growing,
with
revenues
hitting
at
least
double
that
of
the
current
GDP.
Companies
need
to
be
able
to
take
advantage
of
that
growth.
That
means
they
should
have
some
degree
of
pricing
power
or
competitive
advantage
where
their
earnings
or
their
EBITDA
(earnings
before
interest,
taxes,
depreciation,
and
amortization)
is
actually
growing
faster
than
their
revenues.
That
growth
should
be
sustainable
for
a
“long
period
of
time,”
based
on
attributes
such
as
total
addressable
market,
and
volatility
in
operating
income
or
profitability
over
time.
A
good
ESG
rating,
according
to
Munro’s
in-house
ESG
scoring
process.
Have
management
teams
that
are
“highly
aligned”
with
their
shareholders.
These
companies
should
have
“amazing
customer
perception”
of
their
products
—
proven
through
data
such
as
Google
trends
and
reviews.
“So
what
we
hope
to
see
is
the
potential
for
the
earnings
of
our
companies
to
double
over
a
five
year
period,”
said
Moore.
“Our
investment
process
targets
stocks
that
can
double
their
earnings
over
a
5
year
period,
which
implies
that
their
earnings
should
approximately
grow
at
least
15%
per
annum,”
Griffin
added.
Stock
picks
Currently,
Griffin’s
biggest
focus
is
in
the
area
of
high
performance
computing,
he
said.
“So
for
a
long
time
we’ve
thought
the
companies
that
help
computers
go
faster,
will
win.
Because
fast
computers
is
the
key
to
all
human
innovation,”
he
said.
He
named
some
stocks
in
his
fund
that
tap
the
trend:
Nvidia
,
ServiceNow
,
TSMC
and
Wise
.
These
are
the
top
10
holdings
of
the
Munro
Global
Growth
fund.
Though
large-cap
stocks
make
up
most
of
his
investments,
Griffin
also
likes
some
smaller-cap
names
that
are
“not
expensive.”
That
includes
Pinterest
and
GoDaddy
, which
he
says
have
the
potential
to
be
big
beneficiaries
of
artificial
intelligence
as
well.
