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We approached our search for growth stocks, by identifying companies that saw an average annual revenue growth rate of at least 40% over the last five years. Following this strategy, we have been able to identify a list of stocks that beat the S&P 500 ETF (SPY) by more than 124 percentage points since March 2017 ( find out more here). Our research has shown that following hedge funds can be a great way to identify stocks capable of beating the market. While picking companies for our list of 10 high growth companies hedge funds are buying, we also took into account another metric – hedge fund sentiment. If you’re just getting started and are looking for some opportunities among growth stocks to invest in, we can help you at least narrow down your search area. It’s also useful to keep in mind the overall market sentiment and the state of the economy in order to understand how much share of your portfolio you can allocate to growth stocks, versus value stocks, versus other securities. While growth stocks can generate high and very high capital gains over the long run, they are also not immune to uncertainty and often this uncertainty is much higher compared to value stocks, which are known to be more stable. However, you must also not forget about the risk factor. Once you’ve identified the industries, you can start searching for leading companies by focusing on players with a strong competitive advantage.