Which Stocks Play the Role of Forwards in your Portfolio?
This is the second post in our series: What football can teach you on Stock Investing? There are four player-positions in football-Forwards, Midfielders, Defenders and Goalkeeper. We can draw direct analogies from how they perform different roles but work together as a team to score goals and also prevent opponents from scoring goals. Companies and their stocks have different characteristics and perform differently under different conditions. You need to understand these differences and use it to your advantage to build a well-diversified portfolio that will deliver healthy-high returns.
This post we talk about companies that can play the role of Forwards in your portfolio.
Who are the Forwards?
Forwards are aggressive players, who play most of the time in the front and are responsible for scoring goals but not for defence. They wait for the ball to come to them and then they race towards the opponent’s goal. In a portfolio, high growth companies play this role. When the economy and market conditions are favourable, their prices rise very fast. That’s because a favourable economy helps such companies grow faster and deliver a very good performance. And if the market is also bullish it tends to price such stocks very high. Thus both the earnings increase and the P/E multiple take the stock prices up very rapidly. Their presence in your portfolio has the effect of generating very high returns in these periods.
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