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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YUM! BRANDS INC. $69 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 437.5 million; Market cap: $30.2 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.yum.com) earned $404 million in the three months ended September 6, 2014, up 165.8% from $152 million a year earlier. Per-share earnings rose 169.7%, to $0.89 from $0.33, on fewer shares outstanding.
If you disregard unusual items, including last year’s writedown of Yum’s investment in the Little Sheep restaurant chain in China, earnings rose 2.4%, to $0.87 a share from $0.85.
Sales declined 3.2%, to $3.35 billion from $3.5 billion. That’s mainly because a food-safety scare has cut traffic at Yum’s KFC outlets in China. As a result, the China division’s same-store sales fell 14%. However, same-store sales rose 3% at the company’s other KFC locations and 3% at Taco Bell. Same-store sales also rose 4% at the India division, while Pizza Hut saw a 1% decline.
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If you disregard unusual items, including last year’s writedown of Yum’s investment in the Little Sheep restaurant chain in China, earnings rose 2.4%, to $0.87 a share from $0.85.
Sales declined 3.2%, to $3.35 billion from $3.5 billion. That’s mainly because a food-safety scare has cut traffic at Yum’s KFC outlets in China. As a result, the China division’s same-store sales fell 14%. However, same-store sales rose 3% at the company’s other KFC locations and 3% at Taco Bell. Same-store sales also rose 4% at the India division, while Pizza Hut saw a 1% decline.
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CEDAR FAIR L.P. $47 (New York symbol FUN; Income Portfolio, Consumer sector; Units outstanding: 55.9 million; Market cap: $2.6 billion; Priceto- sales ratio: 2.2; Dividend yield: 6.0%; TSINetwork Rating: Average; www.cedarfair.com) owns 11 amusement parks, three outdoor water parks, one indoor water park and five hotels.
The partnership reported record revenue of $939 million in the first eight months of 2014. Excluding a water park Cedar Fair sold in August 2013, comparable- park revenue improved by $12 million, or 1.3%, in 2014.
Colder-than-normal summer weather in the Great Lakes region cut attendance by 1%. However, visitors spent an average of 3% more in Cedar Fair’s parks.
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The partnership reported record revenue of $939 million in the first eight months of 2014. Excluding a water park Cedar Fair sold in August 2013, comparable- park revenue improved by $12 million, or 1.3%, in 2014.
Colder-than-normal summer weather in the Great Lakes region cut attendance by 1%. However, visitors spent an average of 3% more in Cedar Fair’s parks.
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KRAFT FOODS GROUP INC. $57 (Nasdaq symbol KRFT; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 594.7 million; Market cap: $33.9 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.kraftfoodsgroup.com) makes a variety of grocery products, including Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia cream cheese, Maxwell House coffee, Jell-O desserts and Miracle Whip salad dressing.
The company has raised its quarterly dividend by 4.8%, to $0.55 a share from $0.525. The new annual rate of $2.20 yields 3.9%. This is the second time Kraft has raised the payout since its spinoff from Mondelez International in October 2012.
Kraft Foods is a buy.
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The company has raised its quarterly dividend by 4.8%, to $0.55 a share from $0.525. The new annual rate of $2.20 yields 3.9%. This is the second time Kraft has raised the payout since its spinoff from Mondelez International in October 2012.
Kraft Foods is a buy.
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NEWMONT MINING CORP. $23 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 498.8 million; Market cap: $11.5 billion; Price-to-sales ratio: 1.5; Dividend yield: 0.4%; TSINetwork Rating: Average; www.newmont.com) has sold its 44% stake in a joint venture that owns the La Herradura gold mine in northern Mexico.
The company received $450 million for its stake. Including this sale, Newmont has now raised $1.3 billion by selling less important assets in the past year. That frees up cash for more promising projects, such as its Merian gold mine in Suriname, which will cost $1 billion and should open in late 2016. Merian’s reserves should last 11 years.
Newmont is a hold.
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The company received $450 million for its stake. Including this sale, Newmont has now raised $1.3 billion by selling less important assets in the past year. That frees up cash for more promising projects, such as its Merian gold mine in Suriname, which will cost $1 billion and should open in late 2016. Merian’s reserves should last 11 years.
Newmont is a hold.
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CANON INC. ADRs $30 (New York symbol CAJ; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.1 billion; Market cap: $33.0 billion; Price-to-sales ratio: 1.0; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.canon.com) continues to see weak demand for printers and digital cameras. That’s because consumers are taking more photos with their smartphones. They’re also increasingly storing their pictures online instead of printing them.
As a result, Canon’s sales fell 6.0% in the three months ended June 30, 2014, to $9.2 billion from $9.8 billion a year earlier.
However, thanks to a successful cost-cutting plan, the company’s earnings jumped 19.2%, to $800.5 million from $671.7 million. Earnings per ADR rose 24.1%, to $0.72 from $0.58 (each American Depositary Receipt represents one common share), on fewer shares outstanding.
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As a result, Canon’s sales fell 6.0% in the three months ended June 30, 2014, to $9.2 billion from $9.8 billion a year earlier.
However, thanks to a successful cost-cutting plan, the company’s earnings jumped 19.2%, to $800.5 million from $671.7 million. Earnings per ADR rose 24.1%, to $0.72 from $0.58 (each American Depositary Receipt represents one common share), on fewer shares outstanding.
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HEWLETT-PACKARD CO. $34 (New York symbol HPQ; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.9 billion; Market cap: $64.6 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.9%; TSINetwork Rating: Average; www.hp.com) plans to break itself into two separate companies.
The first firm, called Hewlett-Packard Enterprise, will sell computing products, like servers and analytics software, to businesses and governments. It will also offer cloud computing services and financing. Hewlett-Packard Enterprise will have annual revenue of $58.4 billion and gross profits of $6 billion.
Meg Whitman, Hewlett’s current chief executive officer, will become this firm’s CEO.
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The first firm, called Hewlett-Packard Enterprise, will sell computing products, like servers and analytics software, to businesses and governments. It will also offer cloud computing services and financing. Hewlett-Packard Enterprise will have annual revenue of $58.4 billion and gross profits of $6 billion.
Meg Whitman, Hewlett’s current chief executive officer, will become this firm’s CEO.
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SNAP-ON INC. $126 (New York symbol SNA; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 58.1 million; Market cap: $7.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.4%; 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 mining companies, electrical power plant operators and other industrial customers.
The company plans to spend $75 million to $80 million in 2014 on upgrades to its distribution network, developing new products and expanding in emerging markets (overseas customers supply around a third of its revenue).
Snap-On is also fueling its growth with acquisitions. In May 2013, it bought Challenger Lifts for $38.2 million. This business makes systems that raise cars off the ground. The purchase contributed $39.3 million to Snap-On’s 2013 revenue of $3.1 billion.
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The company plans to spend $75 million to $80 million in 2014 on upgrades to its distribution network, developing new products and expanding in emerging markets (overseas customers supply around a third of its revenue).
Snap-On is also fueling its growth with acquisitions. In May 2013, it bought Challenger Lifts for $38.2 million. This business makes systems that raise cars off the ground. The purchase contributed $39.3 million to Snap-On’s 2013 revenue of $3.1 billion.
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MONSANTO CO. $113 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 524.4 million; Market cap: $59.3 billion; Price-to-sales ratio: 3.9; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.monsanto.com) gets 70% of its revenue from genetically modified seeds for corn, soybeans and other crops. The remaining 30% comes from selling herbicides, mainly under the Roundup brand.
In its 2014 fiscal year, which ended August 31, 2014, Monsanto’s earnings rose 10.4%, to $2.7 billion from $2.5 billion in 2013. Per-share earnings gained 13.5%, to $5.22 from $4.60, on fewer shares outstanding. Without unusual items, such as costs to settle a lawsuit, earnings per share rose 14.7%, to $5.23 from $4.56.
Sales rose 6.7%, to $15.9 billion from $14.9 billion. Seed sales gained 3.9%, as record soybean seed demand offset weaker sales of corn seeds. Sales of other agricultural products rose 13.1%.
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In its 2014 fiscal year, which ended August 31, 2014, Monsanto’s earnings rose 10.4%, to $2.7 billion from $2.5 billion in 2013. Per-share earnings gained 13.5%, to $5.22 from $4.60, on fewer shares outstanding. Without unusual items, such as costs to settle a lawsuit, earnings per share rose 14.7%, to $5.23 from $4.56.
Sales rose 6.7%, to $15.9 billion from $14.9 billion. Seed sales gained 3.9%, as record soybean seed demand offset weaker sales of corn seeds. Sales of other agricultural products rose 13.1%.
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PEPSICO INC. $94 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.5 billion; Market cap: $141.0 billion; Price-to-sales ratio: 2.2; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.pepsico.com) has launched Pepsi True, a new cola that has 30% less sugar than regular Pepsi.
This new drink uses stevia, an all-natural sweetener without the calories or health drawbacks of sugar. Pepsi True will also contain no artificial sweeteners or high-fructose corn syrup.
The launch follows a nine-year decline in U.S. soft drink sales as a result of increased health concerns spurred by research linking these drinks to obesity and other conditions.
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This new drink uses stevia, an all-natural sweetener without the calories or health drawbacks of sugar. Pepsi True will also contain no artificial sweeteners or high-fructose corn syrup.
The launch follows a nine-year decline in U.S. soft drink sales as a result of increased health concerns spurred by research linking these drinks to obesity and other conditions.
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FAIR ISAAC CORP. $56 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 32.2 million; Market cap: $1.8 billion; Price-to-sales ratio: 2.7; Dividend yield: 0.1%; TSINetwork Rating: Average; www.fico.com) makes FICO Scores, a computer program that helps businesses make better decisions about customer creditworthiness. It also makes software that helps credit card issuers control fraud and analyze their cardholders’spending patterns.
In its 2014 third quarter, which ended June 30, Fair Isaac earned $29.2 million, down 0.1% from $29.3 million a year earlier. Earnings per share rose 3.8%, to $0.83 from $0.80, on fewer shares outstanding.
Overall revenue gained 7.5%, to $197.6 million from $183.8 million. Revenue from its applications division (66% of the total) rose 12.9% on increased licensing fees from software that detects bank fraud.
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In its 2014 third quarter, which ended June 30, Fair Isaac earned $29.2 million, down 0.1% from $29.3 million a year earlier. Earnings per share rose 3.8%, to $0.83 from $0.80, on fewer shares outstanding.
Overall revenue gained 7.5%, to $197.6 million from $183.8 million. Revenue from its applications division (66% of the total) rose 12.9% on increased licensing fees from software that detects bank fraud.
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