The growth potential or trajectory of a company is another way investors can distinguish investable companies. Stocks can be divided into growth stocks or value stocks.
Companies that are developing new products and growing into new lines of business are considered growth companies.
Companies that fall into growth stock category are often not profitable for a reason. They are continuing to re-invest their earnings into hiring and the development of new products and lines of business. Growth companies are often in new fields such as technology or biotechnology. Growth stocks do really well in times of low-interest rates and economic expansion.
Popular growth stocks include: Amazon, Apple, Zoom, Etsy, Shopify, Facebook, Netflix, Google, Twitter, and Tesla.
Companies that have been established and have very stable earnings are considered value stocks.
Value stocks are often called blue-chip companies. These businesses have been around for a long time and are ubiquitous in our everyday lives. It's very unlikely they will disappear anytime soon, and for the most part, are no longer growing rapidly. Instead, these businesses are great at generating income for us through the form of dividends. Value stocks do really well in times of economic contraction and recessions.
Popular value stocks include: IBM, Colgate, All-State insurance, Chevron, CVS, General Mills, Bank of America.