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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ENCANA CORP. $15.20 (Toronto symbol ECA; Shares outstanding: 741.1 million; Market cap: $11.6 billion; TSINetwork Rating: Average; Dividend yield: 2.3%; www.encana.com) produced 416,700 barrels a day (74% gas, 26% oil) in the three months ended December 31, 2014. That’s down 20.4% from 523,400 barrels a year earlier.
As well, Encana’s realized gas prices, which include the benefit of hedging contracts, fell 4.1%, while oil prices declined 0.9%. As a result, the company’s cash flow per share fell 44.0%, to $0.51 from $0.91.
Encana plans to spend $2.0 billion to $2.2 billion on new projects and upgrades in 2015, down from its earlier forecast of $2.7 billion. Even so, that’s more than its projected cash flow of $1.4 billion to $1.6 billion.
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As well, Encana’s realized gas prices, which include the benefit of hedging contracts, fell 4.1%, while oil prices declined 0.9%. As a result, the company’s cash flow per share fell 44.0%, to $0.51 from $0.91.
Encana plans to spend $2.0 billion to $2.2 billion on new projects and upgrades in 2015, down from its earlier forecast of $2.7 billion. Even so, that’s more than its projected cash flow of $1.4 billion to $1.6 billion.
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SONY CORP. ADRs $27 (www.sony.com) has started selling its new PlayStation 4 video-game console in China. The company has sold 20.2 million units since it launched the new version in November 2013. However, Chinese gamers tend to prefer playing on personal computers or mobile devices, so it is unclear if they will buy the PlayStation....
SHERWIN-WILLIAMS CO. $281 (www.sherwin-williams.com) earned $9.31 a share in 2014, up 24.6% from $7.47 in 2013. Sales rose 9.3%, to $11.1 billion from $10.2 billion. These gains are partly due to Mexican paint maker Comex’s U.S. and Canadian operations (including 314 stores), which Sherwin bought for $165 million in September 2013....
QUAKER CHEMICAL CORP. $83 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 13.3 million; Market cap: $1.1 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.4%; TSINetwork Rating: Average; www.quakerchem.com) began operating in 1918 and currently operates 34 plants in 21 countries. These facilities make lubricants and chemicals that keep mechanical parts from rusting.
This small-cap stock is riskier than many of our other recommendations, but Quaker has a long history of increasing its earnings— and dividends.
The company’s revenue rose 40.8%, from $544.1 million in 2010 to $765.9 million in 2014. That’s partly because it bought smaller firms that expanded its product lines and geographic reach.
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This small-cap stock is riskier than many of our other recommendations, but Quaker has a long history of increasing its earnings— and dividends.
The company’s revenue rose 40.8%, from $544.1 million in 2010 to $765.9 million in 2014. That’s partly because it bought smaller firms that expanded its product lines and geographic reach.
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KRAFT FOODS GROUP INC. $83 (Nasdaq symbol KRFT; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 588.0 million; Market cap: $48.8 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.kraftfoodsgroup.com) is merging with H.J. Heinz.
The new firm— The Kraft Heinz Company— will be the 5th largest food company in the world, with annual revenue of $28 billion.
Under the terms of the deal, Kraft shareholders will receive one share of the new firm for each share they currently hold. They will also receive a special dividend of $16.50 a share.
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The new firm— The Kraft Heinz Company— will be the 5th largest food company in the world, with annual revenue of $28 billion.
Under the terms of the deal, Kraft shareholders will receive one share of the new firm for each share they currently hold. They will also receive a special dividend of $16.50 a share.
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IDEXX LABORATORIES INC. $150 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 47.1 million; Market cap: $7.1 billion; Price-to-sales ratio: 4.8; No dividends paid; TSINetwork Rating: Average; www.idexx.com) earned $3.99 a share in 2014, up 14.7% from $3.48 in 2013. Sales rose 7.9%, to $1.5 billion from $1.4 billion.
These gains are mainly because veterinarians are buying more of Idexx’s equipment for detecting diseases in pets. That’s also spurring more demand for products vets must continuously replenish.
The company now sells its products in the U.S. directs to veterinarians instead of through distributors. That hurts its short-term growth, but should expand its future profit margins. However, the stock is expensive at 34.2 times the $4.38 a share that Idexx will probably earn in 2015.
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These gains are mainly because veterinarians are buying more of Idexx’s equipment for detecting diseases in pets. That’s also spurring more demand for products vets must continuously replenish.
The company now sells its products in the U.S. directs to veterinarians instead of through distributors. That hurts its short-term growth, but should expand its future profit margins. However, the stock is expensive at 34.2 times the $4.38 a share that Idexx will probably earn in 2015.
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HEWLETT-PACKARD CO. $32 (New York symbol HPQ; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.8 billion; Market cap: $57.6 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.2%; TSINetwork Rating: Average; www.hp.com) is buying Aruba Networks (Nasdaq symbol ARUN), a maker of hardware and software that help businesses make their high-speed wireless networks faster and more secure.
Hewlett will pay $3.0 billion when it completes the purchase later this year. If you include the cash Aruba holds, the purchase price falls to $2.7 billion.
Hewlett-Packard is a hold.
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Hewlett will pay $3.0 billion when it completes the purchase later this year. If you include the cash Aruba holds, the purchase price falls to $2.7 billion.
Hewlett-Packard is a hold.
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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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