Baris ERKAYA / EXCHANGE ANALYSIS
In fact, the war of two types of investors in the stock markets is as old as the stock market history. Leaving aside the daily traders, who are actually players, not investors, there are dividend investors on one side of this debate and growth investors on the other. There are very fundamental differences between the two. Of these, growth investors don’t look at or care about any of the other’s arguments about whether the stock is cheap or not. According to them, the stock they invest in is always cheap as long as the company they invest in is growing steadily.
Can SASA be more valuable than Koç Holding?
The other part describes the prices reached by these stocks as unbelievable. For example, a comparison made recently by critics of growth stocks draws attention: SASA, which is seen as one of the flag carriers of growth stocks, has become the most valuable company in the stock market, with a market value of 8.3 billion dollars, surpassing Koç Holding with a market value of 6.2 billion dollars. According to this segment, this is illogical.
Might be for growth investors
On the other hand, according to growth investors, who cited the stock return performances of the last 10 years as an example, the problem is not that SASA is expensive, but the low market value of companies like Koç Holding. These investors believe that there is no problem with the level reached by SASA’s market value in terms of growth rate. In other words, they believe that the performance it has shown in the past will continue in the future as long as the same growth rates continue.
Fastest growing in the last 10 years
Starting from the 2012/06 balance sheet period, we analyzed the growth performance of companies’ net profit, net sales, operating profit, total assets and equity size every year for the last 10 years. During this analysis, we set out some criteria to be as conservative as possible. These; they have been listed on the stock market long enough to cover the last 10-year benchmarking period or they have announced their results, they have not gone negative in any of these 5 balance sheet items in any six-month period after 2012/06. So, we can summarize the analysis as follows. 2013/2012 (06), 2014/2013 (06), 2015/2014 (06)… dollar Based on the calculation of the changes in all balance sheet items separately, a performance report was made from the best to the worst, and scores were given. Then, 10-year average scores were determined for each balance sheet item for 10 years. Finally, the overall score average of these 10-year averages in 5 balance sheet items was revealed. Alongside all these performances, we also included a comparison of the dollar-based prices of these stocks 10 years ago with their current dollar-based prices. We’ve even included dividend data to help give some insight into the reason for those who don’t act accordingly in price increases, even though many of them look like growth stocks, that is, gains in balance sheet items as fast as a growth stock.
Dividend stocks that reduce cost to zero
Now let’s take our journey into the depths of some analysis. In fact, it can be easily seen at first glance that many of the dividend stocks outperform many growth stocks in terms of financial performance.
One of them is Aselsan. Aselsan is one of the most stable dividend paying companies in the stock market. In addition, it can easily enter the top 10 in terms of balance sheet growth. Companies such as Çemtaş, Ege Industry, BİM, Şişecam, Jantsa, Erbosan, Ereğli Demir-Çelik, Alarko GYO are other examples. But of course, some of these companies seem to have made a loss in the last 10 years in terms of dollars. However, the situation is not as it seems. The costs of those who invested in some of these stocks 10 years ago are almost zero as of today. The reason for this is that, thanks to the dividends received from these stocks for 10 years, the cost of purchasing stocks decreases every year, and as of this year, they have decreased to a level close to zero. In other words, those who invest in dividend stocks defend the same argument as those who invest in growth stocks, in a different way. So which stocks are these? If the investors of Ege Industry, Ereğli Demir- Çelik, Alarko GYO, Ford Otosan, Alkim Kimya, İndeks Bilgisayar purchased their first shares 10 years ago, they have received back all of the money they first invested through dividends, if they did not add anything to their portfolio. After that it means all profit. If the stocks have provided above-average returns during this period, it means that the earnings have grown even more.
Gaining growth stocks
What about those who invest in growth stocks? SASA is indisputably the top among the dividend stocks invested by the most passionate individual investors. Another is Hektaş. We can often see that those who invest in these two stocks as growth stocks are in heated discussions on platforms such as twitter. The most important point they are right is that the financial growth performance of the shares of these companies was really accompanied by their share prices. SASA shares have grown by 6 thousand 204 percent in dollar terms in the last 10 years, while Hektaş shares have grown by 4 thousand 290 percent.
Those who fall into both categories
However, there are stocks that show both growth and dividend characteristics. For example, Jantsa, while paying dividends for all of the last 10 years, is in the top 10 in dollar terms. Companies such as Ege Endüstri, Sarkuysan, Çemtaş, Ereğli Demir Çelik and Erbosan are other shares with similar characteristics. For this reason, it seems very debatable whether these stocks are dividend stocks or growth stocks. On the other hand, growth stocks are actually separated within themselves. Companies, some focused on sales and accompanying profit growth, others on asset growth (ie asset growth and equity growth). It is possible to clearly see in our table which of these stocks are focused on turnover and profitability growth, and which are focused on asset growth. Let’s get back to acquaintance. Another common feature of growth stocks is that they generally do not distribute dividends and use the dividends they keep inside to finance the company’s rapid growth.
These dividends are invested in production, expansion or research development. Since the investors of these companies are growth investors, this policy does not actually bother their shareholders. That is, until there is no growth for a long time despite these funds, which are not distributed and the growth financing is directed, and accordingly, the share prices do not show a serious increase. The common feature of growth investors is that they are patient.
Ascension with faith and confidence
From here, we reach another feature of growth stocks:
Growth stocks are actually growing with faith and confidence. This belief and confidence does not deteriorate unless the expected growth and stock rise performance deteriorates for a long time. As a result, we can see more valuable market values in these stocks than Koç Holding. Most growth stocks have high valuation ratios, such as price/earnings. Because here the focus is not on how many times the price of the profit is. How much the company will grow… This also paves the way for a rapid rise in share prices with the same belief and trust mechanism. Tesla is an example of one of the most striking global growth stocks. With a price/earnings ratio of 1444 in 2020, Tesla’s P/E was 36 times the S&P 500 and NASDAQ average P/E. Tesla P/E fell to 107.94 after the fall in global share prices due to the Fed effect. However, it still has an P/E of 18 times the S&P 500 average. Shares such as Netflix, Apple, Amazon, Block, Paypal, Square are examples of other global growth stocks. On the other hand, this feature (rising with faith and confidence) is actually a handicap for such stock investors. Because the deterioration of trust, failure to reach the expected performance for a long time, this stocks It can also cause the chain to run completely in reverse. For this reason, it is also accepted that there are riskier stocks with the philosophy that growth stocks will suffer more if they fall from high.
Characteristics of growth stocks
So what are growth stocks and what are their features? In fact, in the jargon of global financial markets, we see companies operating in new and fast-growing markets with common features of growth stocks, thus making a journey towards leadership both by benefiting from the growth rate of these sectors and with a faster growth performance than the sector in which they operate. However, exemplary growth stocks in Turkey are mostly operating in some traditional sectors. Of course, we are not seeing some recently emerged examples that fit the first definition. For example, renewable energy, micro mobility, electric vehicles, new energy storage technologies, companies with investments in genetic research can be given as examples. But we will examine these companies in our analyzes in the coming weeks. Since our topic this week is the analysis of the last 10 years, these companies could not find a place for themselves in this analysis.