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Finance GlossaryGrowth Stocks
Growth Stocks
Definition of Growth Stocks
Growth stocks are shares of companies that have the potential to outperform the market. These are stocks can grow faster than the market due to strong fundamental characteristics like a strong balance sheet, high Earnings Per Share, solid P/E, and more that can bolster its profits in the medium to long term.
Related Terms
Averaging Down
Averaging down means buying more shares when the price drops, thereby bringing down your overall average cost of investing. For example:
Day 1 (Normal price)
Day 1 (Normal price)
- Shares bought of XYZ: 10
- Price of each share: Rs. 1000
- Total cost of investing: Rs. 10,000
- Average investment cost: Rs. 1000
Day 2 (Lower price)
- Shares bought of XYZ: 10
- Price of each share: Rs. 900
- Total cost of investing: Rs. 9,000
- Average investment cost: Rs. 900
Averaging Down
- Initial average cost of investing (Day 1): Rs. 1000
- New average cost of investing (Day 1 & Day 2): Rs. 950
Range Bound
Range Bound refers to a market or stock price that fluctuates within a defined horizontal channel, between clear support and resistance levels, without establishing a strong trend. Prices oscillate as buying pressure at the lower bound meets selling at the upper bound, indicating indecision among investors. This condition suits range-trading strategies using oscillators like RSI, but breakouts can signal trend changes.
Warrant
A warrant is a financial instrument that gives the holder the right, but not the obligation, to buy a company’s shares at a predetermined price before a specific expiry date. For example, investors may receive warrants during fundraising rounds, benefiting if the company’s share price rises above the exercise price.
Margin of Safety
Margin of Safety refers to the difference between a company’s intrinsic value and its market price. For example, if a stock’s intrinsic value is ₹100 and it trades at ₹70, then the ₹30 difference is the margin of safety.
Negative Working Capital
Negative Working Capital refers to a situation where a company’s short-term assets are lower than its short-term liabilities. This implies the business is using supplier credit or advance payments to run its operations. Although it may suggest cash pressure, in certain business models, it can reflect operational efficiency.
Basing
Basing happens when a security trades sideways after prolonged periods of falling prices.
As a result, the security forms a “base” or flat pattern which means there is little to no upward or downward movement and a decline in volatility.
This may go on for a relatively long time but is crucial as basing is an indicator of any meaningful reversal that may happen.
As a result, the security forms a “base” or flat pattern which means there is little to no upward or downward movement and a decline in volatility.
This may go on for a relatively long time but is crucial as basing is an indicator of any meaningful reversal that may happen.
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