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.
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ALCOA INC. $13 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.2 billion; Market cap: $15.6 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.9%; TSINetwork Rating: Average; www.alcoa.com) has agreed to buy RTI International Metals (New York symbol RTI), which makes titanium components for airplanes, armoured vehicles, oil and gas machinery and other industrial products.
RTI’s investors will exchange their holdings for Alcoa common shares. If you include RTI’s cash balances and debt, the deal is worth $1.5 billion. Alcoa expects to close it in the next six months.
Alcoa is a buy.
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RTI’s investors will exchange their holdings for Alcoa common shares. If you include RTI’s cash balances and debt, the deal is worth $1.5 billion. Alcoa expects to close it in the next six months.
Alcoa is a buy.
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AMERICAN EXPRESS CO. $80 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $80.0 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.5%; TSINetwork Rating: Average; www.americanexpress.com) has raised its quarterly dividend by 11.5%, to $0.29 a share from $0.26. The new annual rate of $1.16 yields 1.5%.
Amex also plans to repurchase up to $6.6 billion worth of its stock by June 30, 2016, up 50.0% from $4.4 billion in 2014.
The company’s 2015 earnings will probably fall to $5.49 a share from $5.56 in 2014. However, Amex’s current restructuring plan, which includes a 6% cut to its workforce, could push its earnings up to $6.00 a share in 2016. The stock trades at 13.3 times that estimate.
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Amex also plans to repurchase up to $6.6 billion worth of its stock by June 30, 2016, up 50.0% from $4.4 billion in 2014.
The company’s 2015 earnings will probably fall to $5.49 a share from $5.56 in 2014. However, Amex’s current restructuring plan, which includes a 6% cut to its workforce, could push its earnings up to $6.00 a share in 2016. The stock trades at 13.3 times that estimate.
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J.P. MORGAN CHASE & CO. $60 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.7 billion; Market cap: $222.0 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.9%; TSINetwork Rating: Average; www.jpmorganchase.com) will pay a quarterly dividend of $0.44 a share starting with the July 2015 payment, up 10.0% from $0.40. The new annual rate of $1.76 yields 2.9%.
Morgan also plans to buy back up to $6.4 billion worth of its shares by June 30, 2016, compared to the $4.8 billion it spent on repurchases in 2014.
The bank will probably earn $5.79 a share in 2015, up 9.5% from $5.29 in 2014. The stock trades at 10.4 times that estimate.
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Morgan also plans to buy back up to $6.4 billion worth of its shares by June 30, 2016, compared to the $4.8 billion it spent on repurchases in 2014.
The bank will probably earn $5.79 a share in 2015, up 9.5% from $5.29 in 2014. The stock trades at 10.4 times that estimate.
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WELLS FARGO & CO. $55 (New York symbol WFC; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 5.2 billion; Market cap: $286.0 billion; Price-to-sales ratio: 3.4; Dividend yield: 2.7%; TSINetwork Rating: Average; www.wellsfargo.com) will raise its quarterly dividend by 7.1%, to $0.375 a share from $0.35. The new annual rate of $1.50 yields 2.7%.
As well, the bank will likely earmark more funds for share buybacks in 2015 than the $9.4 billion it spent last year. That will help push up this year’s projected earnings to $4.16 a share from $4.10 in 2014. The stock trades at 13.2 times that forecast.
Wells Fargo is a buy.
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As well, the bank will likely earmark more funds for share buybacks in 2015 than the $9.4 billion it spent last year. That will help push up this year’s projected earnings to $4.16 a share from $4.10 in 2014. The stock trades at 13.2 times that forecast.
Wells Fargo is a buy.
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MCKESSON CORP. $226 (New York symbol MCK; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 232.8 million; Market cap: $52.6 billion; Price-to-sales ratio: 0.3; Dividend yield: 0.4%; TSINetwork Rating: Above Average; www. mckesson.com) is the largest wholesale drug distributor in the U.S. and Canada. It also sells surgical tools and health and beauty products.
In addition, the company makes computers and software that help clinics and pharmacies manage their drug inventories. The technology solutions division accounts for just 2% of McKesson’s revenue but supplies 12% of its earnings.
In February 2014, McKesson acquired 77.6% of Celesio AG, a German firm that distributes prescription drugs in Europe and Brazil. If you include McKesson’s share of Celesio’s cash, it paid $4.5 billion for this stake. Celesio has issued more shares since then, reducing McKesson’s interest to 75.9%.
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In addition, the company makes computers and software that help clinics and pharmacies manage their drug inventories. The technology solutions division accounts for just 2% of McKesson’s revenue but supplies 12% of its earnings.
In February 2014, McKesson acquired 77.6% of Celesio AG, a German firm that distributes prescription drugs in Europe and Brazil. If you include McKesson’s share of Celesio’s cash, it paid $4.5 billion for this stake. Celesio has issued more shares since then, reducing McKesson’s interest to 75.9%.
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TERADATA CORP. $43 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 147.9 million; Market cap: $6.4 billion; Price-to-sales ratio: 2.3; No dividends paid; TSINetwork Rating: Average; www.teradata .com) makes computers and software that capture and store large amounts of a business’s data. It then analyzes this information and identifies buying habits and other trends.
In 2014, Teradata’s earnings fell 1.5%, to $452 million from $459 million in 2013. But per-share earnings rose 3.6%, to $2.86 from $2.76, on fewer shares outstanding. Revenue gained 1.5%, to $2.73 billion from $2.69 billion.
Strong competition from bigger firms, like IBM and Oracle, will likely cut Teradata’s 2015 earnings to $2.60 a share. The stock trades at a somewhat high 16.5 times that forecast.
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In 2014, Teradata’s earnings fell 1.5%, to $452 million from $459 million in 2013. But per-share earnings rose 3.6%, to $2.86 from $2.76, on fewer shares outstanding. Revenue gained 1.5%, to $2.73 billion from $2.69 billion.
Strong competition from bigger firms, like IBM and Oracle, will likely cut Teradata’s 2015 earnings to $2.60 a share. The stock trades at a somewhat high 16.5 times that forecast.
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MTS SYSTEMS CORP. $75 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.0 million; Market cap: $1.1 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.6%; TSINetwork Rating: Average; www.mts.com) makes equipment and software that manufacturers use to test the behaviour of materials, machines and structures.
In its fiscal 2015 first quarter, which ended December 27, 2014, MTS’s revenue rose 3.0%, to $142.6 million from $138.4 million a year earlier. Overall earnings improved 14.5%, to $13.8 million from $12.0 million. Earnings per share gained 16.7%, to $0.91 from $0.78, on fewer shares outstanding. MTS spends 4% of its revenue on research.
The higher earnings are partly due to a recent restructuring plan that should cut MTS’s annual costs by $6 million.
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In its fiscal 2015 first quarter, which ended December 27, 2014, MTS’s revenue rose 3.0%, to $142.6 million from $138.4 million a year earlier. Overall earnings improved 14.5%, to $13.8 million from $12.0 million. Earnings per share gained 16.7%, to $0.91 from $0.78, on fewer shares outstanding. MTS spends 4% of its revenue on research.
The higher earnings are partly due to a recent restructuring plan that should cut MTS’s annual costs by $6 million.
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KEYSIGHT TECHNOLOGIES INC. $37 (New York symbol KEYS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 168.0 million; Market cap: $6.2 billion; Price-to-sales ratio: 2.2; No dividends paid; TSINetwork Rating: Average; www.keysight.com) makes gear for testing electronics.
The company sells its products to industrial clients, including computer chipmakers (43% of total revenue), communications equipment suppliers (34%) and aerospace and defence firms (23%).
In its fiscal 2015 first quarter, which ended January 31, 2015, Keysight’s revenue gained 4.5%, to $701 million from $671 million a year earlier. Without the negative impact of exchange rates, revenue rose 7%.
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The company sells its products to industrial clients, including computer chipmakers (43% of total revenue), communications equipment suppliers (34%) and aerospace and defence firms (23%).
In its fiscal 2015 first quarter, which ended January 31, 2015, Keysight’s revenue gained 4.5%, to $701 million from $671 million a year earlier. Without the negative impact of exchange rates, revenue rose 7%.
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AGILENT TECHNOLOGIES INC. $41 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 336.0 million; Market cap: $13.8 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.0%; TSINetwork Rating: Average; www.agilent.com) has completed its plan to split into two publicly traded companies.
One firm kept the Agilent name and stock symbol and focuses on testing equipment for medical research labs. It gets 70% of its revenue from overseas.
The second company, called Keysight Technologies (see right), makes testing systems for electronics.
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One firm kept the Agilent name and stock symbol and focuses on testing equipment for medical research labs. It gets 70% of its revenue from overseas.
The second company, called Keysight Technologies (see right), makes testing systems for electronics.
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ABB LTD. ADRs $21 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $48.3 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.abb.com) makes transformers, transmission systems and circuit breakers for electrical utilities. The Switzerland-based firm also produces automation systems and robotics that industrial clients use to improve their productivity.
As part of a new plan to focus on its main operations, ABB sold several small businesses for a total of $1.1 billion in 2014. As well, the company is focusing on power projects with strong potential and turning down risky, less profitable orders. At the same time, a restructuring plan, including plant closures and job cuts, saved the company a further $1.1 billion in 2014.
Partly due to asset sales, ABB’s revenue fell 4.8% in 2014, to $39.8 billion from $41.8 billion in 2013. However, orders for new equipment rose 6.7%, to $41.5 billion from $38.9 billion.
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As part of a new plan to focus on its main operations, ABB sold several small businesses for a total of $1.1 billion in 2014. As well, the company is focusing on power projects with strong potential and turning down risky, less profitable orders. At the same time, a restructuring plan, including plant closures and job cuts, saved the company a further $1.1 billion in 2014.
Partly due to asset sales, ABB’s revenue fell 4.8% in 2014, to $39.8 billion from $41.8 billion in 2013. However, orders for new equipment rose 6.7%, to $41.5 billion from $38.9 billion.
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