Even with a paper due, nothing is going to stop me from getting this column out! This may have something to do with our good friend Johnny Fontaine’s “business associates” paying a visit to my house and explaining what would happen to my kneecaps if I did not complete his investment strategy in a timely manner. Maybe.

Anyhow, I would like to notify you, the Oberlin College community, of an important fact. I am not a licensed broker, and all of my stock suggestions should be taken as suggestions for further research, not as buy recommendations. As a matter of fact, you should not take anyone’s suggestion as a reason to buy a stock. You should do your own research to decide if a particular stock is a risk you want to take. The honor code applies here.

Johnny only likes one type of stock; the type that makes money. There are many ways to identify stocks, as fast growers or asset plays or recoveries or stagnants or cyclicals or... you get the idea. But let’s break it down to extremely simple terms, as I am both tired and not terribly bright. We have growth stocks and value stocks. Today, we will be focusing on the former.

We want growth stocks to grow. Yup. You don’t have to be a nuclear scientist to figure that one out. Common characteristics of growth stocks are higher P/E ratios and smaller market caps than value stocks. Companies are like people, and once they get to a certain size, they can’t keep on growing. Unless they’re like my little brother, who is now seven inches taller than me. Karma does exist, and Dave, I’m sorry I stole your Battle Beasts 15 years ago.

So how should we invest in growth stocks? The most important strategy is to avoid hot sectors or hot stocks. Starbucks (ticker: SBUX) was a hot stock before it got hot. By the time people knew it was hot, it no longer was. Krispy Kreme (ticker: KKD) got so hot the glaze was burnt off. Unfortunately for those investors, KKD turned out to be topped with hype and filled with bittersweet accounting.

A stock I like to watch at present is Pixar (ticker: PIXR), although that may be because I love their movies so much. On the other hand, Pixar is about to end its contract with Disney that ate most of its profits. They have little to no debt. They are, in my opinion, a very strong brand that delivers a product successfully and profitably.

There are risks. Dreamworks (ticker: DWA) could prove to be a strong competitor, no matter how much I dislike Shrek personally. There is no guarantee of continued success as in the past. So Johnny, be prepared if you decide to take this one on.

Another big problem, and probably the reason I won’t buy this stock; everyone knows the name. Typically, companies with big names that are well recognized do not make the best growth stocks. Xerox (ticker: XRX) has been a shareholder’s nightmare ever since it went public, its price now is very close to what it was 20 years ago.

Rather than try and figure out how to find the best growth stocks, why don’t I just rip off one of my favorite investors, Peter Lynch? According to Pete (I can call him Pete ‘cuz we’re down like that) the best growth stocks come from industries that absolutely bore people, that nobody would even consider investing in, and, ideally, nobody has ever heard of. The greatest stock in the world was the company that patented some sort of faucet handle.

Pete wants us to understand the companies we invest in inside and out, rather than speculate on stocks our broker recommends. It is important to know the industry, how the company fits in, and how it can compete. It’s like fantasy baseball, except you end up making money and it isn’t a complete waste of time.

What I’m trying to get at here, is that it’s hip to be square. I recommend anyone interested in growth investing pick up a copy of Pete’s Beat the Street and One Up On Wall Street. There is so much to consider when growth investing, which is why it is both very risky and also very lucrative, and there’s no way I can cover it all in 600 words.

For those of us who don’t like roller coasters, there’s value investing, coming next week!