“Stock market insiders” use several terms related to different types of stocks:
Growth stocks and high flyers
“Growth stocks” are securities of companies expected to deliver above-average earnings growth rates regardless of economic conditions. Investors who bet on growth stocks assume that stock prices will reflect the anticipated business performance in the form of a continuous rise in share price.
“High flyers” is the term used to describe securities with a steep rise in price. These are usually shares of companies that are predicted to generate high earnings.
What are underperformers and outperformers?
Investors should exercise greater caution when investing in “underperformers.” This is the term analysts use for a stock whose performance is worse than that of the overall market. However, maybe this stock will become an “outperformer” in the future, surpassing the performanceof the overall market.
Speculative stocks and cyclical stocks
Investors who buy “speculative stocks” are generally betting that a company in crisis – whose shares are consequently available at a low price – will ultimately overcome its problems and achieve a turnaround. The anticipated rise in the price of such highly speculative “turnaround stocks” should then yield high profits. The situation is different for cyclical stocks, or “cyclicals.” These are stocks of companies that are heavily dependent on the business cycle or the economic situation, which can lead to steady, wave-like fluctuations in their stock prices. Investors who bet on cyclicals aim to buy a stock at its lowest point and sell it when it has reached its highest price.
Note: However, there is one warning that investment advisors repeatedly emphasize and that investors should always take very seriously: A stock’s past performance is only a limited indicator of its future price movements.
