8 Stock Investment Categories

1. Dividend Cash Cows (Income Stocks)

What it is: These are companies purchased primarily for their reliable cash dividends rather than for large price appreciation.
Quick checks: They typically offer a dividend yield of at least 4–5%, supported by several years of rising dividends, steady earnings growth, and strong operating cash flow. They also tend to maintain conservative debt levels and a sustainable payout ratio (generally between 20% and 100%).
Typical investment type: Defensive to Moderately Cyclical.
Common examples: REITs, as well as selected banks and utility companies.

2. Large Cap Predictables

What it is: These are large, wide-moat companies with stable products or services that do not become obsolete, allowing them to generate predictable earnings and cash flows.
Quick checks: They usually have well-established brands, steadily rising earnings, and long-term growth rates in the range of 5–10% per year.
Typical investment type: Defensive or Moderately Cyclical.
Common examples: Colgate (CL), Procter & Gamble (PG), Johnson & Johnson (JNJ).

3. Large Cap Growth

What it is: These are large companies that continue to grow rapidly, often compounding revenue or free cash flow above 20–25% due to strong secular trends.
Quick checks: They demonstrate a clear multi-year growth runway and may appear expensive at certain points in the cycle because of high growth expectations.
Typical investment type: Moderately Cyclical.
Common examples: Alphabet (GOOGL), Amazon (AMZN), Microsoft (MSFT).

4. Speculative Growth Stocks

What it is: These are younger or emerging growth companies with the potential to scale into future industry leaders, offering significant upside but carrying higher risk.
Quick checks: They often show rapid revenue expansion while still working toward consistent profitability, which is why investors typically use smaller position sizes when buying them.
Typical investment type: Moderately Cyclical to Cyclical.
Common examples: Meituan, Zoom, Beyond Meat.

5. Deep Cyclical Stocks

What it is: These are capital-intensive businesses whose performance is heavily influenced by economic cycles, causing their profitability to rise and fall sharply.
Quick checks: Investors usually aim to buy these companies near the bottom of their industry cycle and take profits near the top, as earnings can fluctuate dramatically depending on economic conditions.
Typical investment type: Cyclical.
Common examples: Banks, real estate developers, and heavy industrial companies.

6. Deep Value Stocks

What it is: These are distressed or out-of-favor companies trading below conservative measures of intrinsic worth, such as valuations close to Net Working Capital minus Long-Term Debt.
Quick checks: Before considering them, investors look for positive operating cash flow and conservative levels of leverage, as these companies often need time to recover.
Typical investment type: Often Cyclical, although this may vary depending on the business.

7. Turnaround Stocks

What it is: These are fundamentally strong companies with durable competitive advantages that have been temporarily affected by negative events such as scandals, lawsuits, or economic downturns.
Quick checks: Their core moat remains intact, yet their share price may trade 40–50% below reasonable value. Successful turnarounds usually require patience, as recoveries can take time.
Typical investment type: Varies, often ranging from Defensive to Moderately Cyclical depending on the underlying industry.

8. Index, Sector and Industry Exchange Traded Funds (ETFs)

What it is: These are diversified investment vehicles that hold baskets of stocks or assets, reducing the risk associated with relying on a single company’s performance.
Quick checks: Their category is determined by what the ETF tracks — such as a broad market index, a specific sector, a thematic trend, bonds, or commodities — and analysis generally focuses on overall trend, technical levels, and simple valuation ratios where applicable.
Typical investment type: Varies depending on the nature of the underlying holdings.
Common examples: Broad market ETFs such as SPY or QQQ, sector ETFs like XLK or XLF, thematic ETFs in areas such as AI or cybersecurity, and bond or commodity ETFs.