Screening for Secular Growth Trends

The most powerful force in investing is a secular growth trend — a long-term, structural shift in the economy that drives demand for certain products and services for years or decades. Think about the rise of cloud computing, the aging global population, or the transition to renewable energy. Companies positioned at the center of these trends can deliver outsized returns as the tailwind pushes their revenue and earnings higher year after year.

Screening for secular growth is not about chasing the latest fad or meme stock. It is about systematically identifying companies with sustained, above-average revenue growth driven by large and expanding addressable markets. This guide shows you how to build screens that separate genuine trend beneficiaries from short-lived hype.

What to Look For

Secular growth companies share several distinguishing characteristics:

• Sustained revenue acceleration: Look for companies with 3 or more consecutive years of double-digit revenue growth. Unlike cyclical growth that ebbs and flows with the economy, secular growth persists through downturns. Revenue growth of 15% or more annually for multiple years is a strong signal.
• Expanding gross margins: Companies riding secular trends often see improving margins as they scale. Rising gross margins indicate that the company has pricing power and is achieving economies of scale — both hallmarks of a business benefiting from structural demand growth.
• High revenue growth relative to peers: Compare a company's growth rate to its sector average. A secular growth company should be growing significantly faster than the industry baseline, indicating it is capturing share in a growing market rather than just riding the tide.
• Strong R&D investment: Companies investing heavily in research and development as a percentage of revenue are often building competitive moats that will sustain their growth advantage. Look for R&D spending above 10% of revenue in technology sectors.
• Recurring or subscription revenue: Businesses with recurring revenue models (SaaS, subscriptions, long-term contracts) provide more predictable growth trajectories. High net retention rates above 110% indicate customers are spending more over time, a powerful secular growth signal.

How to Set Up the Screen

Building a secular growth screen requires focusing on consistency and magnitude of growth:

1. Filter for year-over-year revenue growth above 15%. This threshold eliminates slow growers and focuses on companies with above-average top-line expansion.
2. Add a quarterly revenue growth filter to confirm the growth trend is ongoing, not just a trailing annual artifact from a strong prior year.
3. Set a minimum market capitalization of $1 billion to focus on companies that have already proven product-market fit and achieved meaningful scale.
4. Filter for positive or improving gross margins to ensure the growth is profitable and scalable. Avoid companies that are growing revenue rapidly but with deteriorating unit economics.
5. Optionally screen by sector to focus on specific secular trends you have conviction in, such as technology for AI and cloud, healthcare for aging demographics, or industrials for electrification.

Interpreting Results

Your secular growth screen will likely surface a mix of well-known growth leaders and lesser-known companies earlier in their growth trajectory. Pay special attention to the less obvious names — the large-cap growers may already be priced for perfection, while mid-cap companies with similar growth profiles may offer better risk-reward.

Evaluate each result by asking: what is the underlying trend driving this growth, and how durable is it? A company growing 20% because of a one-time pandemic boost is fundamentally different from one growing 20% because of a multi-decade demographic shift. The durability of the underlying trend determines whether the growth will persist or mean-revert.

Common Pitfalls

• Confusing cyclical recovery with secular growth: Some companies show impressive growth numbers simply because they are rebounding from a downturn. Check multi-year revenue trends and compare against pre-downturn levels to distinguish genuine secular growth from cyclical snapback.
• Ignoring valuation entirely: Secular growth stocks often trade at premium multiples, and sometimes those premiums are justified. But paying 50x revenue for a company growing 20% leaves very little margin for error. Always consider what you are paying for the growth.
• Narrow trend exposure: Be careful about loading your portfolio with companies all riding the same trend. If sentiment shifts on AI or clean energy, an entire cluster of your holdings could decline simultaneously. Diversify across multiple secular themes.
• Late-cycle entry: By the time a secular trend is obvious to everyone, valuations may already reflect most of the growth. The best returns come from identifying trends early, when the market is still underestimating the growth runway ahead.

Screen Now

Ready to find companies riding the next big secular growth wave? Use our screener to identify high-growth businesses:

• Start with the Growth Screener Preset to find companies with strong and sustained revenue and earnings growth across all sectors.