The majority of growth managers are earnings-driven, which means they use a company's earnings as their yardstick for growth. If a company isn't growing significantly faster than the market average or its industry peers, these managers aren't interested.
Within this earnings-driven bunch, momentum managers are by far the most daring. Momentum investors buy a rapidly growing company that they believe will deliver a quarterly earnings surprise or other favorable news that will drive the stock's price higher. Managers who follow this style try to buy a stock just prior to a positive earnings announcement (that is, when a company announces that its earnings are higher than Wall Street analysts predicted) and sell it before it misses an estimate (that is, when its earnings fall below what analysts thought they would be) or has other negative news. Momentum managers pay little heed to stock prices. Their funds, therefore, can feature ultra-high price multiples. They also tend to have high annual turnover rates, which can make for big capital-gains payouts and poor tax efficiency. Some prominent momentum funds include Turner Midcap Growth TMGFX, Brandywine BRWIX, and American Century Vista TWCVX.
Some managers seek earnings growth in a different way. Instead of searching for stocks with the potential to surprise during earnings season, these managers seek stocks that boast high or sustainable yearly growth rates. Although some funds will look for high growth rates higher than 20% (and will often pay up for such performance), other, more moderate earnings-growth-oriented managers look for stocks growing in a slow but steady fashion. The slow-and-steady group usually buys blue-chip stocks such as Wal-Mart WMT and Oracle ORCL. As long as these stocks continue to post decent earnings, slow-and-steady managers tend to hold on to them. Steady-growth funds often have more modest price ratios than their peers. But when reliable growers take the lead, these funds endure as much price risk as the more aggressive funds. Funds known for following this moderate-earnings-growth strategy include American Funds Growth Fund of America AGTHX and Fidelity Blue Chip Growth FBGRX.