What sort of firms is likely to grow?

 Yesterday I said I would like to invest in the stocks of firms that have massive growth potentials. This comes to another question what sort of firms is likely to grow. There are many different answers by different people, such as high-tech companies, newly set-up businesses; however, there is not a definite answer to this question because of the uncertainty of the future. Companies with massive growth potentials also mean they have a massive risk and they are highly likely to bankrupt. In addition, the entry barrier to investing in such companies is very high that only high net wealth investors (whose net wealth is over millions of dollars) are allowed to enter. Moreover, the information collection and analysis for venture capital investment are far more difficult, as the information is almost entirely private (risk of asymmetry information and moral hazard); additionally, some of these businesses' founders do not just look for investors' investment but also look for their networking and other resources. Therefore, venture capital investment should be done by institutions rather than individuals.

Let's focus on stock markets since venture capital investment is not suitable for individuals. Value investors love monopoly companies since they do not face competitions and are able to generate stable returns. However, since their returns are stable for a long period of time, their stock prices also tend to be stable, therefore they do not have much growth potential in terms of stock prices. In today's world, many companies can state themselves as monopolies because of product differentiations; however, many of them are still competing with other companies. I think the sectors where companies that are competing with each other at all costs are the sectors that have massive growth potential. Companies are not stupid that when they are competing at all costs, they are seeing much greater returns in the future once they win the competition at the moment. Such companies' stock prices could be low because of their high risk; in addition, due to the competition, their financial reports do not look good either, this would add downward pressure on their stock prices. Furthermore, even if investing in companies which do not succeed in their competitions, there is a probability of firms being acquired by market successors and investment would still possibly receive something back; and of course, investors should withdraw their investments when there is a clear signal of failure and turn to other market players, which now definitely have higher probabilities to succeed.