The Patient Art of Focused Growth Investing

What does it mean to invest in growth in this market environment? Growth stocks have gone on some hot streaks over the last few years, but in an ever-complicated market environment, identifying growth firms remains challenging. As such, investors may want to consider the benefits of patient, focused growth investing via active, fundamental research.

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While some growth strategies pick and track an index, leaving the thinking to index designers, a focused growth strategy operates differently. Thanks to an active remit, focused growth can lean more heavily on proprietary, bottom-up analysis. Consider, for example, a strategy like the Natixis Loomis Sayles Focused Growth ETF (LSGR).

LSGR, managed by Aziz Hamzaogullari, CFA, takes a long-term, private equity approach to investing, per its annual report.

“We believe identifying those few businesses with such characteristics is an art, not a science,” said Hamzaogullari in the ETF’s annual report. “As a result of this rigorous approach, ours is a selective, high-conviction portfolio of typically 20-30 stocks.”

Patience, Research, and Growth Investing

That long-term approach privileges patience, with “research … completed well in advance of the opportunity to invest” per commentary on the strategy.

Not all growth strategies are created equal. By emphasizing patience and research, such a strategy can provide investors with high-conviction investments as opposed to broad tracking of ostensibly “growthy” areas like tech, for example. When constructing a portfolio, such a strategy can work as a pillar of an equity allocation.

How, then, has LSGR performed? The focused growth investing strategy returned 13.4% over the last three months. That has helped it outperform its ETF Database Category and FactSet Segment averages, per VettaFi data. For a 59 basis point fee, investors can get exposure to its focused growth investing approach.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.