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Typically, a growth stock is defined by rapid revenue and profit growth. Does this make commodity companies growth stocks? Revenue and profits are soaring, but the reality is volume growth for many commodities is unspectacular, with demand increasing in the low-to-mid single digits.

When Henry Ford came up with the Model T, most other automobile manufacturers would produce several hundred cars per year and charge several thousand dollars per car, according to Wall Street historian John Steele Gordon in this weekend's Barron's. In 1908, Ford made 10,607 Model Ts, selling them for $850 each. By utilizing the assembly line, Ford was able to drive down cost, which, in turn, permitted him to charge customers less. Lower prices meant more Americans could afford automobiles, translating into huge volume growth and massive economies of scale for Ford Motor and its part suppliers.

By 1916, Model Ts were being assembled in only 93 minutes and the price dropped to $360, according to Gordon. Ford Motor sold 730,041 Model Ts that year and had 50% global market share. Volume in the auto industry was no longer being defined by a few hundred but by hundreds of thousand if not a million cars produced each year.

What industries demonstrate these characteristics today? It is not the auto sector any longer, that's for sure. Wal-Mart Stores (NYSE: WMT) and Home Depot Inc (NYSE: HD) successfully played the economies-of-scale curve for decades. Semiconductors and technologies are still on this curve. Moore's Law is all about playing this strength.

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Targeting growth industries originally appeared on BloggingStocks on Mon, 25 Jun 2007 14:55:00 EST. Please see our terms for use of feeds.

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