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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WINDSTREAM HOLDINGS INC. $10 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 602.8 million; Market cap: $6.0 billion; Price-to-sales ratio: 1.0; Dividend yield: 10.0%; TSINetwork Rating: Average; www.windstream.com) gets 73% of its revenue by selling high-speed Internet and other communication services to 357,700 businesses.
The other 27% comes from selling phone, Internet and video services to 3.2 million residential customers, mainly in the rural U.S.
In July 2014, the company announced that it would transfer its fibre optic and copper networks, some land and buildings to a new real estate investment trust (REIT). Windstream will then lease these assets from the REIT for at least the next 15 years at $650.0 million annually.
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The other 27% comes from selling phone, Internet and video services to 3.2 million residential customers, mainly in the rural U.S.
In July 2014, the company announced that it would transfer its fibre optic and copper networks, some land and buildings to a new real estate investment trust (REIT). Windstream will then lease these assets from the REIT for at least the next 15 years at $650.0 million annually.
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TUPPERWARE BRANDS CORP. $66 (New York symbol TUP; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 50.4 million; Market cap: $3.3 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.tupperwarebrands.com) makes household goods, mainly plastic food and beverage containers, as well as cosmetics and fragrances.
The stock is down 32% from its peak of $97 in December 2013. That’s mainly because the company gets 75% of its sales from outside North America, and the recent rise in the U.S. dollar has hurt the contribution of its overseas operations.
In the quarter ended September 27, 2014, Tupperware’s sales fell 2.4%, to $588.7 million from $603.2 million a year earlier. But if you exclude the negative impact of currency rates, sales rose 4%. Gains in emerging nations like Indonesia and Brazil offset declines in established markets, particularly Germany.
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The stock is down 32% from its peak of $97 in December 2013. That’s mainly because the company gets 75% of its sales from outside North America, and the recent rise in the U.S. dollar has hurt the contribution of its overseas operations.
In the quarter ended September 27, 2014, Tupperware’s sales fell 2.4%, to $588.7 million from $603.2 million a year earlier. But if you exclude the negative impact of currency rates, sales rose 4%. Gains in emerging nations like Indonesia and Brazil offset declines in established markets, particularly Germany.
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INTERNATIONAL FLAVORS & FRAGRANCES INC. $100 (New York symbol IFF; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.0 million; Market cap: $8.1 billion; Priceto- sales ratio: 2.7; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.iff.com) makes over 36,000 compounds that improve the taste of food and the smell of consumer products.
In the third quarter of 2014, IFF’s sales rose 4.3%, to $773.8 million from $742.3 million a year earlier. That’s partly due to Israel-based Aromor Flavors and Fragrances, which IFF bought for $102.5 million in January 2014. Stronger demand in developing countries also contributed to the gain.
Earnings improved 8.4%, to $107.4 million from $99.0 million. Per-share earnings rose 9.2%, to $1.31 from $1.20, on fewer shares outstanding. Excluding unusual items, such as costs to integrate Aromor, earnings per share gained 8.2%, to $1.32 from $1.22. IFF spends over 8% of its sales on research, so it’s more profitable than it appears.
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In the third quarter of 2014, IFF’s sales rose 4.3%, to $773.8 million from $742.3 million a year earlier. That’s partly due to Israel-based Aromor Flavors and Fragrances, which IFF bought for $102.5 million in January 2014. Stronger demand in developing countries also contributed to the gain.
Earnings improved 8.4%, to $107.4 million from $99.0 million. Per-share earnings rose 9.2%, to $1.31 from $1.20, on fewer shares outstanding. Excluding unusual items, such as costs to integrate Aromor, earnings per share gained 8.2%, to $1.32 from $1.22. IFF spends over 8% of its sales on research, so it’s more profitable than it appears.
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INTEL CORP. $37 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 4.9 billion; Market cap: $181.3 billion; Price-to-sales ratio: 3.4; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.intel.com) expects its revenue to rise by about 5% in 2015, compared to the consensus forecast of a 3.4% increase. That’s because businesses are replacing their older computers more quickly than expected.
Intel only recently started making chips for mobile devices, so it offered manufacturers special discounts to encourage them to switch over. However, it expects to cut these subsidies, as it will soon launch a new mobile chip that combines a processor with a wireless modem. That cuts the need for two separate chips.
The company has also raised its dividend by 6.7%. The new annual rate of $0.96 a share yields 2.6%.
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Intel only recently started making chips for mobile devices, so it offered manufacturers special discounts to encourage them to switch over. However, it expects to cut these subsidies, as it will soon launch a new mobile chip that combines a processor with a wireless modem. That cuts the need for two separate chips.
The company has also raised its dividend by 6.7%. The new annual rate of $0.96 a share yields 2.6%.
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TERADATA CORP. $45 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 153.0 million; Market cap: $6.9 billion; Price-to-sales ratio: 2.6; No dividends paid; TSINetwork Rating: Average; www.teradata.com) makes computers and software that capture and store large amounts of a business’s data, including its sales and inventory. It then analyzes this information and identifies buying habits and other trends. That helps its clients maker better business decisions.
In the three months ended September 30, 2014, Teradata’s earnings fell 4.3%, to $111 million from $116 million a year earlier. But per-share earnings rose 1.4%, to $0.71 from $0.70, on fewer shares outstanding.
Revenue gained just 0.2%, to $667 million from $666 million. Revenue in the Americas (61% of the total) fell 1.0%, mainly because many of Teradata’s customers have already upgraded their data analytics systems, weakening demand for new equipment. However, revenue from Teradata’s international operations (39%) gained 1.9%.
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In the three months ended September 30, 2014, Teradata’s earnings fell 4.3%, to $111 million from $116 million a year earlier. But per-share earnings rose 1.4%, to $0.71 from $0.70, on fewer shares outstanding.
Revenue gained just 0.2%, to $667 million from $666 million. Revenue in the Americas (61% of the total) fell 1.0%, mainly because many of Teradata’s customers have already upgraded their data analytics systems, weakening demand for new equipment. However, revenue from Teradata’s international operations (39%) gained 1.9%.
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ADOBE SYSTEMS INC. $73 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 498.7 million; Market cap: $36.4 billion; Price-to-sales ratio: 8.9; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) makes software for publishing companies and website developers.
Its main products include Adobe Acrobat, which lets users create and edit electronic documents in the widely used PDF format, and its Creative Suite package of photo editing (Photoshop) and desktop publishing programs.
In 2012, Adobe started selling its Creative Suite software as a cloud-based service called Creative Cloud. Users pay a monthly subscription fee that lets them access the software and store documents online. That gives Adobe more predictable revenue streams than selling its products as a one-time purchase.
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Its main products include Adobe Acrobat, which lets users create and edit electronic documents in the widely used PDF format, and its Creative Suite package of photo editing (Photoshop) and desktop publishing programs.
In 2012, Adobe started selling its Creative Suite software as a cloud-based service called Creative Cloud. Users pay a monthly subscription fee that lets them access the software and store documents online. That gives Adobe more predictable revenue streams than selling its products as a one-time purchase.
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APPLE INC. $119 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.9 billion; Market cap: $702.1 billion; Price-to-sales ratio: 3.9; Dividend yield: 1.6%; TSINetwork Rating: Average; www.apple.com) continues to profit from strong demand for its iPhone smartphone, which accounts for 56% of its sales. Other products include Mac computers (16%), iPad tablets (13%) and iPod music players and other services (15%).
In its 2014 fiscal year, which ended September 27, 2014, Apple’s earnings rose 6.7%, to $39.5 billion from $37.0 billion in 2013. The company spent $45.0 billion on share buybacks in the past year. As a result, earnings per share gained 13.6%, to $6.45 from $5.68 (all per-share amounts adjusted for a 7-for-1 split in June 2014). Sales rose 7.0%, to $182.8 billion from $170.9 billion.
The company recently launched a new mobile payment system called Apple Pay. This service lets users add credit card information to their phones and use them to make purchases at tap-and-payenabled cash registers and, in some cases, online. To prevent fraud, the phone will confirm the user’s identity with a fingerprint scan.
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In its 2014 fiscal year, which ended September 27, 2014, Apple’s earnings rose 6.7%, to $39.5 billion from $37.0 billion in 2013. The company spent $45.0 billion on share buybacks in the past year. As a result, earnings per share gained 13.6%, to $6.45 from $5.68 (all per-share amounts adjusted for a 7-for-1 split in June 2014). Sales rose 7.0%, to $182.8 billion from $170.9 billion.
The company recently launched a new mobile payment system called Apple Pay. This service lets users add credit card information to their phones and use them to make purchases at tap-and-payenabled cash registers and, in some cases, online. To prevent fraud, the phone will confirm the user’s identity with a fingerprint scan.
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BHP BILLITON LTD. ADRs $55 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 1.6 billion; Market cap: $88.0 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.5%; TSINetwork Rating: Average; www.bhpbilliton.com) still plans to spin off its aluminum, manganese, nickel and silver operations, as well as some coal mines, into a separate company in the first half of 2015.
After the spinoff, BHP will focus on four main commodities: metallurgical coal, iron ore, copper and oil. In all, they account for 96% of its earnings.
Prices of these commodities have declined in the past few months, mainly due to slowing growth in China, Japan and Europe. In response, the company is laying off workers and making its main properties more productive.
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After the spinoff, BHP will focus on four main commodities: metallurgical coal, iron ore, copper and oil. In all, they account for 96% of its earnings.
Prices of these commodities have declined in the past few months, mainly due to slowing growth in China, Japan and Europe. In response, the company is laying off workers and making its main properties more productive.
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UNITED TECHNOLOGIES CORP. $110 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 911.7 million; Market cap: $100.3 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.1%; TSINetwork Rating: Above Average; www.utc.com) has five main divisions: Climate, Controls & Security (26% of 2013 revenue, 27% of earnings) makes heating and air conditioning equipment under the Carrier brand, as well as burglar alarms and fire-safety products; Pratt & Whitney (23%, 19%) manufactures aircraft engines; Aerospace Systems (21%, 21%) makes engine control systems and other parts for aircraft; Otis (20%, 27%) makes elevators; and Sikorsky (10%, 6%) makes helicopters.
The company’s revenue rose 10.0%, from $52.9 billion in 2009 to $58.2 billion in 2011.
In 2012, it bought North Carolina-based Goodrich Corp., which makes aircraft parts (including landing gear, wheels and brakes) and maintains and fixes planes. United Technologies paid $18.3 billion, including assuming $1.9 billion of Goodrich’s debt. However, it also sold some less important businesses, so its revenue fell 0.8%, to $57.7 billion, in 2012.
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The company’s revenue rose 10.0%, from $52.9 billion in 2009 to $58.2 billion in 2011.
In 2012, it bought North Carolina-based Goodrich Corp., which makes aircraft parts (including landing gear, wheels and brakes) and maintains and fixes planes. United Technologies paid $18.3 billion, including assuming $1.9 billion of Goodrich’s debt. However, it also sold some less important businesses, so its revenue fell 0.8%, to $57.7 billion, in 2012.
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TEMPUR SEALY $53.95 (New York symbol TPX; TSINetwork Rating: Speculative)(800-878-8889; www.tempursealy.com; Shares outstanding: 60.9 million; Market cap: $3.3 billion; No dividends paid) completed its $1.3- billion purchase of rival Sealy in March 2013. This was a major acquisition for Tempur Sealy (formerly Tempur-Pedic), but it has let the company diversify into traditional spring-coil beds.
The purchase is also helping Tempur Sealy offset rising competition in its current business; the company makes and distributes mattresses and neck pillows made of its Tempur material, which conforms to the body to provide support and alleviate pressure points.
Competitors Simmons Bedding and Serta have both successfully launched memory-foam mattresses that directly compete with Tempur Sealy’s products.
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The purchase is also helping Tempur Sealy offset rising competition in its current business; the company makes and distributes mattresses and neck pillows made of its Tempur material, which conforms to the body to provide support and alleviate pressure points.
Competitors Simmons Bedding and Serta have both successfully launched memory-foam mattresses that directly compete with Tempur Sealy’s products.
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