An Empirical Analysis: Revisiting Earnings Acceleration as a Source of Diversifying Excess Returns
Earnings acceleration—a change in the velocity of growth—indicates something is affecting a company’s business prospects. Identifying that force has been a cornerstone of our growth investment process for more than 30 years.
Our Global Growth Equity Desk expanded the scope of analysis to determine the continued viability of earnings acceleration as a potential source of significant, durable and diversifying excess returns. Does the data still stand up?
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Research Highlights:
Percent of companies with positive earnings over time
Distribution of accelerating companies by sector
Excess returns over MSCI ACWI Index
Excess returns by region and decile
Correlation of an earnings acceleration portfolio to three equity factors: momentum, value and size
Meet the Team
Our global growth equity team constructs portfolios of diverse holdings by identifying and investing in companies demonstrating an accelerating and sustainable trend in earnings growth. We believe focusing on inflection points in companies’ fundamentals allows us to identify those in the beginning stages of their growth cycle. This, combined with detailed fundamental analysis and a strict buy/sell discipline, is designed to help us achieve our goal of excess returns over time. Learn More >
Authors
Xiaoping Zhang, CFA, CRM
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References to specific securities are for illustrative purposes only and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
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