60% of US Growth Stocks Have Negative Earnings

Growth stocks in the United States have negative earnings in more than half of cases, although these stocks have outperformed considerably in recent years. 

The economic climate is unique, the actors are unique, and the industries and firms that are caught up in the frenzy may also be distinct from one another. 

Every single one of these statements is accurate. 

However, classic common threads also run through bubbles because they are born of human nature: the fear of missing out, watching with envy as others become wealthy around you, career risk and (for investment professionals) keeping up with peers and benchmarks, the willing suspension of healthy disbelief, and the dissolution of discipline. 

Excessive bidding on the shares of companies that are losing money is a typical bubble indicator. 

Certainly, it has made an appearance in the form of the SPAC craze. 

60% of the Growth stocks in the Russell 3000 Index are losing money, and this was the case even before the COVID-induced recession. 

But over the past few years, these very companies have generated enormous gains from price movement, surpassing their Value counterparts by a wide margin. 

As a result, investors are making money on companies that are losing money, which is never a good sign, especially when it is done in such large numbers and at such inflated prices. 

In addition, while it is not common, it is also not exceptional. 

Both in the late 1990s and throughout the speculative bubble of 2008, we all witnessed the same type of speculative behavior and it didn’t end well.