Do fast-growing companies make good investments?
You've heard it before. I've heard it before. "If you keep going like that, you're going to burn out."
There's only so long you can keep going - working, exercising, partying - at full pace before things start to break down. It even impacts the humble production line: if you don't shut it down from time to time, for preventive maintenance, you're in for a helluva disaster.
But does the same approach apply to companies? Or is this one area where you really can keep growing at fast rates, seemingly without consequence? And, most importantly from our perspective, should you invest in them, or head for the hills?
The first thing we should tackle is "fast growing" and it's here we need to make a clear distinction.
We're not - or we shouldn't be - talking about a fast-growing share price. After all, the share price only tells you what people are currently thinking about a company, and very little about the company itself.
Remember when lithium stocks were hot. Or graphene? Perhaps you recall the pot stock craze or, yes, the dotcom boom?
You might recall when Blackmores shares sold for $225 or when Bellamy's traded at over $22 per stub. Those were wonderful examples of fast-growing share prices but in each case also of record highs that are yet to be retaken. Or, more simply, of investors getting ahead of themselves.
Speaking of the dotcom crash, you might also know that Amazon went from a split-adjusted $US3 per share to a high of $US100, before crashing back to under $US8 - a loss of over 90%. But here's where Amazon is different. From that "crash" back to $US8, the share price shot to over $US2000 earlier this year.
Which is, in a neat package, a good example of both a fast-growing share price and a fast-growing business. Since that $US8 share price back in the early 2000s, Amazon's annual sales have gone from $US3 billion to a whopping $US177 billion - that's growth of 29% a year for the best part of two decades.
Indeed, the Amazon story is instructive. Many investors and commentators spent much of those two decades telling us that Amazon was overpriced. "It's not making money," they'd say.
Which was true - but woefully missing the point. Amazon was building a strong brand, a loyal customer base and unbeatable scale. Those who saw that early have been well rewarded.
Our own CSL is another example. While it's always looked expensive, the company continues to deliver strong growth year after year.
And you can add businesses such as Cochlear and Flight Centre to that list. The latter is a particularly good example, given that the long-term business performance has been very strong, even if the share price chart looks like a mountain range viewed from the side - with plenty of valleys for good measure.