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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ADOBE SYSTEMS INC. $76.03 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 500.3 million; Market cap: $38.0 billion; No dividends paid) makes software that lets computer users create, edit and share documents in the popular PDF format. Graphic designers also use its programs to create print publications and web pages.
In its fiscal 2015 first quarter, which ended February 27, 2015, Adobe earned $0.44 a share, up 46.7% from $0.30 a year earlier. Revenue gained 10.9%, to $1.11 billion from $1.00 billion.
Like Symantec, Adobe is shifting from selling software as a one-time purchase and toward a subscription model. It now gets 70% of its revenue from recurring sources, up from 52% a year ago.
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In its fiscal 2015 first quarter, which ended February 27, 2015, Adobe earned $0.44 a share, up 46.7% from $0.30 a year earlier. Revenue gained 10.9%, to $1.11 billion from $1.00 billion.
Like Symantec, Adobe is shifting from selling software as a one-time purchase and toward a subscription model. It now gets 70% of its revenue from recurring sources, up from 52% a year ago.
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SYMANTEC CORP. $23.79 (Nasdaq symbol SYMC; TSINetwork Rating: Average)(408-517-8000; www.symantec.com; Shares outstanding: 682.4 million; Market cap: $16.3 billion; Dividend yield: 2.5%) sells computersecurity technology, including antivirus and emailfiltering software, to businesses and consumers.
In its fiscal 2015 third quarter, which ended January 2, 2015, Symantec earned $367 million, unchanged from a year earlier. However, per-share earnings rose 1.9%, to $0.53 from $0.52, on fewer shares outstanding.
Revenue slipped 3.9%, to $1.64 billion from $1.71 billion. But if you disregard the negative impact of the high U.S. dollar on the company’s overseas sales, revenue was flat.
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In its fiscal 2015 third quarter, which ended January 2, 2015, Symantec earned $367 million, unchanged from a year earlier. However, per-share earnings rose 1.9%, to $0.53 from $0.52, on fewer shares outstanding.
Revenue slipped 3.9%, to $1.64 billion from $1.71 billion. But if you disregard the negative impact of the high U.S. dollar on the company’s overseas sales, revenue was flat.
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CHESAPEAKE ENERGY $16.02 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chk.com; Shares outstanding: 665.0 million; Market cap: $10.1 billion; Dividend yield: 2.2%) has filed regulatory reports showing that its chairman, Archie W. Dunham, recently purchased one million of the company’s shares at prices ranging from $13.92 to $14.05, for a total of $14 million. Dunham now holds 2.6 million shares.
As well, activist investor Carl Icahn recently increased his stake in the company to 10.98% from 9.98%. He bought his shares for $14.15 each and now holds 73 million shares, up from 66 million. Icahn has a long history of pushing companies to make changes that increase shareholder value.
Investors can put too much weight on insider trading, since insiders can delude themselves about their employer just as easily as outsiders—and it pays to remember that insiders may sell for a variety of personal reasons that have nothing to do with the company. On the other hand, insiders only make substantial buys for one reason—they think the company has investment appeal.
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As well, activist investor Carl Icahn recently increased his stake in the company to 10.98% from 9.98%. He bought his shares for $14.15 each and now holds 73 million shares, up from 66 million. Icahn has a long history of pushing companies to make changes that increase shareholder value.
Investors can put too much weight on insider trading, since insiders can delude themselves about their employer just as easily as outsiders—and it pays to remember that insiders may sell for a variety of personal reasons that have nothing to do with the company. On the other hand, insiders only make substantial buys for one reason—they think the company has investment appeal.
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DELPHI ENERGY $1.78 (Toronto symbol DEE; TSINetwork Rating: Speculative)(403-265-6171; www.delphienergy.ca; Shares outstanding: 155.5 million; Market cap: $269.0 million; No dividends paid) develops, produces and explores for oil and natural gas in Alberta. Its average daily production of 12,035 barrels of oil equivalent is 69% gas and 31% oil.
In the quarter ended December 31, 2014, Delphi’s cash flow per share rose 42.9%, to $0.10 from $0.07. That’s because it raised its production by 33.9% and realized higher oil prices.
Like Birchcliff, Delphi will cut spending this year: its outlays will now total $50 million, down from $101 million in 2014. However, that should still let it keep production steady at today’s levels. The company could also raise its spending later this year if oil and gas prices move higher.
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In the quarter ended December 31, 2014, Delphi’s cash flow per share rose 42.9%, to $0.10 from $0.07. That’s because it raised its production by 33.9% and realized higher oil prices.
Like Birchcliff, Delphi will cut spending this year: its outlays will now total $50 million, down from $101 million in 2014. However, that should still let it keep production steady at today’s levels. The company could also raise its spending later this year if oil and gas prices move higher.
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BIRCHCLIFF ENERGY $7.73 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Shares outstanding: 152.3 million; Market cap: $1.1 billion; No dividends paid) develops, produces and explores for oil and gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 85% of its output is gas. The remaining 15% is oil.
In the three months ended December 31, 2014, Birchcliff’s cash flow per share rose 17.1%, to $0.41 from $0.35 a year earlier. The company raised its daily output by 32.8%, offsetting lower oil prices and boosting its cash flow.
Like many oil and gas producers, Birchcliff plans to cut back on exploration and development spending. This year, it will devote $266.7 million to this purpose, down from $450.0 million in 2014.
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In the three months ended December 31, 2014, Birchcliff’s cash flow per share rose 17.1%, to $0.41 from $0.35 a year earlier. The company raised its daily output by 32.8%, offsetting lower oil prices and boosting its cash flow.
Like many oil and gas producers, Birchcliff plans to cut back on exploration and development spending. This year, it will devote $266.7 million to this purpose, down from $450.0 million in 2014.
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IAMGOLD CORP. $2.67 (Toronto symbol IMG; TSINetwork Rating: Speculative)(1-888- 464-9999; www.iamgold.com; Shares outstanding: 391.3 million; Market cap: $1.0 billion; No dividends paid) will sell its 1% revenue royalty on the Diavik diamond mine in the Northwest Territories to Sandstorm Gold Ltd. (symbol SSL on Toronto).
Diavik is Canada’s largest diamond mine and has been in operation since 2003.
Sandstorm will pay $52.5 million U.S. in cash plus three million warrants. IAMGold can exercise the warrants for up to five years after production from a new zone at Diavik starts up. The exercise price is $4.50; Sandstorm currently trades at $4.38.
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Diavik is Canada’s largest diamond mine and has been in operation since 2003.
Sandstorm will pay $52.5 million U.S. in cash plus three million warrants. IAMGold can exercise the warrants for up to five years after production from a new zone at Diavik starts up. The exercise price is $4.50; Sandstorm currently trades at $4.38.
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BMTC GROUP $16.50 (Toronto symbol GBT.A; TSINetwork Rating: Extra Risk)(514-648-5757; No website; Shares outstanding: 44.9 million; Market cap: $725.0 million; Dividend yield: 1.5%) is one of Quebec’s biggest retailers of furniture, electronics and appliances, with 37 outlets. It mainly sells these items through its two affiliates: Brault & Martineau and Ameublements Tanguay.
In March 2012, BMTC introduced a new banner, Economax, which offers lower-priced products. The company rebranded four outlets that it had operated as Brault & Martineau liquidation centres.
BMTC has opened seven more Economax stores since then. It has also bought land in Drummondville for a new store to open in late 2015.
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In March 2012, BMTC introduced a new banner, Economax, which offers lower-priced products. The company rebranded four outlets that it had operated as Brault & Martineau liquidation centres.
BMTC has opened seven more Economax stores since then. It has also bought land in Drummondville for a new store to open in late 2015.
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REITMANS (CANADA) LTD. $7.26 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384- 1140; www.reitmans.com; Shares outstanding: 64.6 million; Market cap: $451.7 million; Dividend yield: 2.8%) owns 823 women’s clothing stores across Canada.
The chain consists of 341 Reitmans, 139 Penningtons, 107 Smart Set, 105 Addition Elle, 76 RW & Co. and 68 Thyme Maternity stores. It also has 21 Thyme Maternity boutiques in Canadian Babies “R” Us stores.
In the quarter ended January 31, 2015, Reitmans’ sales fell 1.8%, to $236.3 million from $240.7 million a year earlier. Sales declined because it closed 55 lessprofitable stores. Same-store sales gained 2.1%.
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The chain consists of 341 Reitmans, 139 Penningtons, 107 Smart Set, 105 Addition Elle, 76 RW & Co. and 68 Thyme Maternity stores. It also has 21 Thyme Maternity boutiques in Canadian Babies “R” Us stores.
In the quarter ended January 31, 2015, Reitmans’ sales fell 1.8%, to $236.3 million from $240.7 million a year earlier. Sales declined because it closed 55 lessprofitable stores. Same-store sales gained 2.1%.
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CALIAN TECHNOLOGIES $18.50 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 7.4 million; Market cap: $136.6 million; Dividend yield: 6.1%) has won a $15- million contract with the Royal Canadian Air Force (RCAF) to provide airworthiness engineering and support. The contract starts immediately and will run to March 31, 2017. It includes one additional option year.
Calian, through its Amtek subsidiary and in conjunction with subcontractor Valcom Consulting Group, will supply 40 engineers to help the RCAF meet its regulatory requirements for the safe and effective operation of its equipment.
This latest deal will add to Calian’s revenue, which should reach $220 million this year. It also demonstrates the company’s ongoing ability to win recurring orders from Canadian federal government departments, including the Department of National Defence.
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Calian, through its Amtek subsidiary and in conjunction with subcontractor Valcom Consulting Group, will supply 40 engineers to help the RCAF meet its regulatory requirements for the safe and effective operation of its equipment.
This latest deal will add to Calian’s revenue, which should reach $220 million this year. It also demonstrates the company’s ongoing ability to win recurring orders from Canadian federal government departments, including the Department of National Defence.
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STANTEC INC. $31.42 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 93.8 million; Market cap: $2.9 billion; Dividend yield: 1.3%) (all figures adjusted for a 2-for-1 share split in November 2014) sells a range of consulting, project-delivery, design and technology services. Its clients operate in a variety of industries, including oil and gas, transportation and construction.
In the three months ended December 31, 2014, Stantec’s revenue rose 15.1%, to $519.6 million from $451.3 million. Earnings gained 6.7%, to $38.1 million, or $0.41 a share, from $35.7 million, or $0.38.
The company continues to grow through acquisitions. One of its latest is Sparling, a 130-person design firm with offices in Seattle, Portland and San Diego. Sparling focuses on electrical engineering and lighting design, and its recent contracts include the University of California San Diego Jacobs Medical Center and Amazon.com’s Seattle South Union Campus.
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In the three months ended December 31, 2014, Stantec’s revenue rose 15.1%, to $519.6 million from $451.3 million. Earnings gained 6.7%, to $38.1 million, or $0.41 a share, from $35.7 million, or $0.38.
The company continues to grow through acquisitions. One of its latest is Sparling, a 130-person design firm with offices in Seattle, Portland and San Diego. Sparling focuses on electrical engineering and lighting design, and its recent contracts include the University of California San Diego Jacobs Medical Center and Amazon.com’s Seattle South Union Campus.
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