High growth shares, and IT stocks in particular, have overperformed the broader market in the last several years. Imagine buying Amazon in 2009! But there are still lots of industries now that can help you get rich and retire early.
To start with, I consider myself to be a value investor. That is, I prefer to invest in large companies with good balance sheets and long operational histories. At the same time, I prefer to buy them at low multipliers. And I still believe that a large percentage of an investor’s portfolio should consist of such companies. Buying a FTSE 100 index fund would be an even better decision for novice investors who hate risks.
However, I’d also like to talk about high growth shares. They tend to be issued by smaller companies operating in innovative industries. They seem to be much less conservative, but at the same time they offer plenty of opportunities to get rich. Â
High growth shares
There is a handful of industries now that offer extraodinary potential for growth. Electric vehicles (EVs) still seem to be one of these. But EVs don’t appear out of nowhere. So, there are many businesses directly benefitting from rising vehicle sales.
To start with, EVs need electric batteries to operate. Lithium and cobalt are essential materials for these batteries. What is more, lithium and cobalt are important components of other electric batteries, including the ones used in e-scooters, smartphones, and laptops. Although the demand for laptops and smartphones kept increasing before the Covid-19 outbreak, the growth rate was not as high as for EVs. Most cobalt comes from the Democratic Republic of Congo, and it seems to me that there will be a big deficit of this material quite soon. So, companies with access to cobalt have a strategic advantage.Â
We can say a very similar thing about rare earth metals, which are also necessary for making EV motors. 90% of them are mined in China. The problem is that there is plenty of uncertainty about US-China relations. Last year I read about the possibility of China refusing to export rare earth metals to the US. If this really happens, countries mining the remaining 10% of these metals will benefit. Most importantly the mining companies will benefit, of course. Â
How to retire early
Obviously, EV companies and their suppliers are not the only high growth industry. There are plenty of other high growth areas worth considering for an enterprising investor. But it’s necessary to choose carefully before buying the businesses operating in these sectors. It is essential to analyse accounting fundamentals before buying a firm’s shares. If you choose the ‘right’ industries and the ‘right’ high growth shares, you will most probably get rich and retire early.