Growth Stocks
Although growth stock picks can be highly volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.
And keep in mind that we focus on growth stocks, which have a good long-term history and favourable prospects. We downplay momentum stocks that tend to attract many investors simply because they are moving faster than the market averages, but are liable to fall sharply when their momentum fades.
There’s room for growth stock investing in your portfolio, but make sure you follow our TSI Network three-part Successful Investor strategy for your overall portfolio:
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
Make better stock picks when you read this FREE Special Report, Canadian Growth Stocks: WestJet Stock, RioCan Stock and More.
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SNAP-ON INC. $158 (New York symbol SNA; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 58.1 million; Market cap: $9.2 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.3%; TSINetwork Rating: Average; www.snapon.com) makes tools for auto mechanics and sells them through a fleet of franchised vans that visit garages. It also makes specialized tools for industrial customers.
The company continues to benefit as the improving economy gives mechanics more cash to spend on tools. Its sales rose 5.1% in the quarter ended April 4, 2015, to $827.8 million from $787.5 million a year earlier. Without the impact of exchange rates and acquisitions, sales gained 9.9%. Earnings per share rose 15.4%, to $1.87 from $1.62.
The stock hit a record high of $158 in May 2015. It now trades at 19.8 times the $7.98 a share Snap-On will likely earn this year. That’s a somewhat high p/e ratio for a company that serves the cyclical automotive industry. The $2.12 dividend yields 1.3%.
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The company continues to benefit as the improving economy gives mechanics more cash to spend on tools. Its sales rose 5.1% in the quarter ended April 4, 2015, to $827.8 million from $787.5 million a year earlier. Without the impact of exchange rates and acquisitions, sales gained 9.9%. Earnings per share rose 15.4%, to $1.87 from $1.62.
The stock hit a record high of $158 in May 2015. It now trades at 19.8 times the $7.98 a share Snap-On will likely earn this year. That’s a somewhat high p/e ratio for a company that serves the cyclical automotive industry. The $2.12 dividend yields 1.3%.
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STANLEY BLACK & DECKER INC. $103 (New York symbol SWK; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 153.7 million; Market cap: $15.8 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.0%; TSINetwork Rating: Average; www.stanleyblack anddecker.com) is one of the world’s largest makers of hand and power tools for consumers. Its top-selling brands include Stanley, Black & Decker, FatMax and Powerlock. This business supplies 62% of the company’s sales.
Stanley also makes building-security products, such as locks and gates (19% of sales) and specialized tools for industrial users, including auto mechanics and construction firms (19%).
The company has a long history of using acquisitions to diversify its operations. Since 2002, it has spent $6.2 billion buying related firms, excluding its March 2010 purchase of rival toolmaker Black & Decker for $4.5 billion in stock.
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Stanley also makes building-security products, such as locks and gates (19% of sales) and specialized tools for industrial users, including auto mechanics and construction firms (19%).
The company has a long history of using acquisitions to diversify its operations. Since 2002, it has spent $6.2 billion buying related firms, excluding its March 2010 purchase of rival toolmaker Black & Decker for $4.5 billion in stock.
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RESTAURANT BRANDS INTERNATIONAL INC. $39 (New York symbol QSR, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 467.0 million; Market cap: $18.2 billion; Price-to-sales ratio: n.a.; Dividend yield: 1.0%; TSINetwork Rating: Average; www.rbi.com) took its current form on December 12, 2014, after Burger King Worldwide (old symbol BKW) acquired Tim Hortons (old symbol THI).
The company is the world’s third-largest fast-food operator, after McDonald’s and Yum Brands, with 14,387 Burger King outlets and 4,724 Tim Hortons locations in 100 countries. Franchisees own and operate all of these restaurants.
If you assume the takeover occurred at the start of 2014, Restaurant Brands cut its loss to $8.1 million, or $0.04 a share, in the three months ended March 31, 2015, from $226.5 million, or $1.12, a year earlier.
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The company is the world’s third-largest fast-food operator, after McDonald’s and Yum Brands, with 14,387 Burger King outlets and 4,724 Tim Hortons locations in 100 countries. Franchisees own and operate all of these restaurants.
If you assume the takeover occurred at the start of 2014, Restaurant Brands cut its loss to $8.1 million, or $0.04 a share, in the three months ended March 31, 2015, from $226.5 million, or $1.12, a year earlier.
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HEWLETT-PACKARD CO. $34 (New York symbol HPQ; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.8 billion; Market cap: $61.2 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.9%; TSINetwork Rating: Average; www.hp.com) is selling 51% of its data-networking equipment and server business in China. Demand for these products has suffered on fears that the U.S. government is using them to collect data on Chinese companies. Hewlett will receive $2.3 billion when it completes the sale by the end of 2015.
Meanwhile, its earnings fell 5.6% in the quarter ended April 30, 2015, to $1.6 billion from $1.7 billion a year earlier. Earnings per share declined 1.1%, to $0.87 from $0.88, on fewer shares outstanding. Revenue fell 6.8%, to $25.5 billion from $27.3 billion.
The company still plans to split into two firms in November 2015: Hewlett-Packard Enterprise will sell computing products, like servers and analytics software, to businesses and governments, while HP Inc. will focus on personal computers and printers. Hewlett expects breakup-related costs of $400 million to $450 million.
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Meanwhile, its earnings fell 5.6% in the quarter ended April 30, 2015, to $1.6 billion from $1.7 billion a year earlier. Earnings per share declined 1.1%, to $0.87 from $0.88, on fewer shares outstanding. Revenue fell 6.8%, to $25.5 billion from $27.3 billion.
The company still plans to split into two firms in November 2015: Hewlett-Packard Enterprise will sell computing products, like servers and analytics software, to businesses and governments, while HP Inc. will focus on personal computers and printers. Hewlett expects breakup-related costs of $400 million to $450 million.
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YUM! BRANDS INC. $92 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 432.4 million; Market cap: $39.8 billion; Price-to-sales ratio: 3.0; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.yum.com) aims to spur sales at its U.S. KFC restaurants with several new initiatives, including upgrading stores and launching new menu items. The company also plans a new series of TV and online ads featuring an actor playing Colonel Harland Sanders, the late founder of Kentucky Fried Chicken.
The stock is up 26% since the start of 2015, partly due to speculation that Yum may spin off its KFC and Pizza Hut chains in China, which account for half of its revenue. Food-safety concerns and strong competition from other fast-food restaurants have hurt Yum’s Chinese operations in the past two years.
Yum Brands is still a hold.
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The stock is up 26% since the start of 2015, partly due to speculation that Yum may spin off its KFC and Pizza Hut chains in China, which account for half of its revenue. Food-safety concerns and strong competition from other fast-food restaurants have hurt Yum’s Chinese operations in the past two years.
Yum Brands is still a hold.
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CAMPBELL SOUP CO. $48 (New York symbol CPB; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 311.8 million; Market cap: $15.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.campbellsoupcompany.com) is the world’s largest maker of canned soups. It also makes Prego canned pasta and sauces, Pepperidge Farm cookies and V8 vegetable juices.
To cut its reliance on canned foods, Campbell is expanding its fresh-food businesses. In 2013, it paid $1.55 billion for Bolthouse Farms, a producer of carrots, dressings and fruit juices. It also acquired leading organic food producer Plum for $249 million.
At the same time, Campbell is cutting costs by eliminating management positions and merging overlapping functions at its divisions. The company expects these moves to save it $200 million a year starting in fiscal 2016.
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To cut its reliance on canned foods, Campbell is expanding its fresh-food businesses. In 2013, it paid $1.55 billion for Bolthouse Farms, a producer of carrots, dressings and fruit juices. It also acquired leading organic food producer Plum for $249 million.
At the same time, Campbell is cutting costs by eliminating management positions and merging overlapping functions at its divisions. The company expects these moves to save it $200 million a year starting in fiscal 2016.
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CONAGRA FOODS INC. $39 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 427.1 million; Market cap: $16.7 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.conagrafoods .com) makes packaged foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Peter Pan peanut butter, Orville Redenbacher popcorn and Reddiwip whipped cream.
Consumers supply 70% of ConAgra’s sales. Businesses, including restaurants and other food makers, provide the remaining 30%.
In January 2013, the company bought Ralcorp Holdings, the largest private-label food maker in the U.S., for $4.75 billion.
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Consumers supply 70% of ConAgra’s sales. Businesses, including restaurants and other food makers, provide the remaining 30%.
In January 2013, the company bought Ralcorp Holdings, the largest private-label food maker in the U.S., for $4.75 billion.
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GENERAL MILLS INC. $56 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 596.1 million; Market cap: $33.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.generalmills.com) is one of the world’s largest food makers. Its top brands include Big G (cereal), Green Giant (canned and frozen vegetables), Pillsbury (baking dough), Old El Paso (tacos), Progresso (soups and salads) and Yoplait (yogourt).
In its fiscal 2015 third quarter, which ended February 22, 2015, General Mills earned $343.2 million, down 16.4% from $410.6 million a year earlier. Earnings per share declined 12.5%, to $0.56 from $0.64, on fewer shares outstanding.
Without unusual items, such as gains and losses on hedging contracts General Mills uses to lock in certain ingredient prices, earnings per share gained 12.9%, to $0.70 from $0.62.
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In its fiscal 2015 third quarter, which ended February 22, 2015, General Mills earned $343.2 million, down 16.4% from $410.6 million a year earlier. Earnings per share declined 12.5%, to $0.56 from $0.64, on fewer shares outstanding.
Without unusual items, such as gains and losses on hedging contracts General Mills uses to lock in certain ingredient prices, earnings per share gained 12.9%, to $0.70 from $0.62.
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MONDELEZ INTERNATIONAL INC. $40 (Nasdaq symbol MDLZ; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $64.0 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.mondelezinternational.com) makes cookies and biscuits (Oreo, Chips Ahoy, Ritz), chocolate bars (Cadbury, Toblerone) and gum and candy (Trident, Chiclets and Halls cough drops).
In May 2014, the company agreed to merge its packaged coffee business with European coffee maker D.E. Master Blenders. Under the deal, Mondelez will contribute its coffee brands, including Jacobs, Gevalia and Tassimo, to a new firm called Jacobs Douwe Egberts. It will get about $4.5 billion in cash and 49% of the new company in return.
Mondelez aims to close the deal by the end of 2015. It will use the cash to buy back shares and pay down its $12.8-billion long-term debt, or 20% of its market cap.
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In May 2014, the company agreed to merge its packaged coffee business with European coffee maker D.E. Master Blenders. Under the deal, Mondelez will contribute its coffee brands, including Jacobs, Gevalia and Tassimo, to a new firm called Jacobs Douwe Egberts. It will get about $4.5 billion in cash and 49% of the new company in return.
Mondelez aims to close the deal by the end of 2015. It will use the cash to buy back shares and pay down its $12.8-billion long-term debt, or 20% of its market cap.
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WAL-MART STORES INC. $75 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.2 billion; Market cap: $240.0 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.walmart .com) aims to spur its online sales with a new plan called ShippingPass that offers U.S. shoppers unlimited threeday shipping for $50 a year. This should help it compete with Amazon’s Prime service, which offers two-day shipping for an annual fee of $99.
Thanks to investments like this, Wal-Mart’s online sales jumped 17% in the first quarter of its 2016 fiscal year, which ended April 30, 2015.
Wal-Mart is also starting to see the benefits of its efforts to improve sales at its U.S. stores, including speeding up checkout lines and opening smaller stores. Same-stores sales in the U.S. (62% of total sales) rose 1.1%, the third straight quarter of growth.
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Thanks to investments like this, Wal-Mart’s online sales jumped 17% in the first quarter of its 2016 fiscal year, which ended April 30, 2015.
Wal-Mart is also starting to see the benefits of its efforts to improve sales at its U.S. stores, including speeding up checkout lines and opening smaller stores. Same-stores sales in the U.S. (62% of total sales) rose 1.1%, the third straight quarter of growth.
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