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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TRILOGY ENERGY CORP. $20.22 (Toronto symbol TET; TSINetwork Rating: Speculative) (403-290-2900; www.trilogyenergy.com; Shares outstanding: 105.1 million; Market cap: $2.8 billion; Dividend yield: 2.1%) reported production of 36,187 barrels of oil equivalent a day (including gas) in the quarter ended June 30, 2014. That’s down 2.7% from 37,209 barrels a year earlier. Cash flow per share rose 9.6%, to $0.80 from $0.73, as higher oil and gas prices offset the production drop.
The company plans to spend $375 million on exploration this year, down 5.5% from the $397 million it spent in 2013. As well, it’s now focusing on its shale oil prospects at Kaybob, Alberta and spending less on its more mature oil pools in the same area.
That shift could push Trilogy’s average daily output to over 42,000 barrels late next year, but it will continue to weigh on the company’s production growth in the meantime.
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The company plans to spend $375 million on exploration this year, down 5.5% from the $397 million it spent in 2013. As well, it’s now focusing on its shale oil prospects at Kaybob, Alberta and spending less on its more mature oil pools in the same area.
That shift could push Trilogy’s average daily output to over 42,000 barrels late next year, but it will continue to weigh on the company’s production growth in the meantime.
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CIMAREX ENERGY $106.95 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 87.0 million; Market cap: $9.0 billion; Dividend yield: 0.6%) produces and explores for natural gas and oil. Gas makes up 48% of the company’s output.
Cimarex’s properties are mostly in the Wolfcamp shale area of the Permian Basin in Texas and New Mexico, and the Cana-Woodford shale area in western Oklahoma.
In the three months ended June 30, 2014, the company’s production averaged 838.7 million cubic feet of natural gas equivalent per day (including oil). That’s up 22.1% from 686.8 million cubic feet a year earlier.
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Cimarex’s properties are mostly in the Wolfcamp shale area of the Permian Basin in Texas and New Mexico, and the Cana-Woodford shale area in western Oklahoma.
In the three months ended June 30, 2014, the company’s production averaged 838.7 million cubic feet of natural gas equivalent per day (including oil). That’s up 22.1% from 686.8 million cubic feet a year earlier.
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DEVON ENERGY CORP. $55.14 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 409.1 million; Market cap: $22.6 billion; Dividend yield: 1.7%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 48% gas and 52% oil.
In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop.
The company narrowed its focus even further with the July 2014 sale of some of its properties to Linn Energy for $2.3 billion. The sale included Devon’s holdings in the Rockies, the onshore Gulf Coast and the Mid-Continent region (which includes Oklahoma, Kansas and Texas).
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In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop.
The company narrowed its focus even further with the July 2014 sale of some of its properties to Linn Energy for $2.3 billion. The sale included Devon’s holdings in the Rockies, the onshore Gulf Coast and the Mid-Continent region (which includes Oklahoma, Kansas and Texas).
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MCCOY GLOBAL $5.00 (Toronto symbol MCB; TSINetwork Rating: Speculative) (780- 453-8451; www.mccoyglobal.com; Shares outstanding: 27.7 million; Market cap: $142.7 million; Dividend yield: 4.0%) has now sold its Inotec Coatings and Hydraulics business for $9.3 million. Inotec makes coatings for oil and gas drilling tools and mining equipment. It also repairs and maintains hydraulic cylinders.
This deal follows McCoy’s sale of its mobile solutions unit earlier this year and completes the company’s shift toward its faster growing and more profitable energy products and services segment.
This business sells hydraulic gear, including power tongs, for drilling rigs. (Power tongs are large wrench-like tools that tighten and loosen the pipe in the drill hole.)
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This deal follows McCoy’s sale of its mobile solutions unit earlier this year and completes the company’s shift toward its faster growing and more profitable energy products and services segment.
This business sells hydraulic gear, including power tongs, for drilling rigs. (Power tongs are large wrench-like tools that tighten and loosen the pipe in the drill hole.)
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ADOBE SYSTEMS INC. $62.19 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 498.7 million; Market cap: $30.4 billion; No dividends paid) reported a 12.5% earnings decline in the quarter ended August 29, 2014, to $0.28 a share from $0.32 a year earlier. Revenue rose 1.0%, to $1.0 billion from $995.1 million.
The company continues to shift away from selling software as a one-time purchase and toward a subscription model. That hurts Adobe’s short-term sales and profits, but it should bring more predictable revenue streams as users continue to switch over.
The stock now trades at 30.8 times the $2.02 a share that Adobe will likely earn in 2015. That’s a high p/e ratio for a company that mainly serves customers in cyclical businesses like publishing.
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The company continues to shift away from selling software as a one-time purchase and toward a subscription model. That hurts Adobe’s short-term sales and profits, but it should bring more predictable revenue streams as users continue to switch over.
The stock now trades at 30.8 times the $2.02 a share that Adobe will likely earn in 2015. That’s a high p/e ratio for a company that mainly serves customers in cyclical businesses like publishing.
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FAIR ISAAC CORP. $54.86 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 32.1 million; Market cap: $1.8 billion; Dividend yield: 0.2%) makes FICO Scores, the program that dominates the market for software that businesses use to evaluate customer creditworthiness. The company is also profiting by selling programs that help credit card issuers control fraud and analyze cardholders’ spending patterns.
In its fiscal 2014 third quarter, which ended June 30, 2014, Fair Isaac’s earnings per share rose 9.1%, to $0.60 from $0.55 a year ago.
Revenue gained 7.5%, to $197.6 million from $183.8 million. The company saw stronger sales at its main applications division (66% of the total) on increased licensing revenue from software that detects bank fraud. That offset a decline in sales of creditscoring software and customized programs for analyzing large amounts of a business’s data.
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In its fiscal 2014 third quarter, which ended June 30, 2014, Fair Isaac’s earnings per share rose 9.1%, to $0.60 from $0.55 a year ago.
Revenue gained 7.5%, to $197.6 million from $183.8 million. The company saw stronger sales at its main applications division (66% of the total) on increased licensing revenue from software that detects bank fraud. That offset a decline in sales of creditscoring software and customized programs for analyzing large amounts of a business’s data.
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BROADRIDGE FINANCIAL SOLUTIONS $39.39 (New York symbol BR; TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 119.5 million; Market cap: $4.7 billion; Dividend yield: 2.7%) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 90% of all proxy votes in the U.S. and Canada.
Without one-time items, Broadridge earned $114.6 million, or $1.16 a share, in its fiscal 2014 fourth quarter, which ended June 30, 2014. That’s up 1.5% from $142.4 million, or $1.15 a share, a year earlier.
Overall revenue gained 2.4%, to $885.9 million from $865.1 million. Revenue from contracts that pay recurring fees rose 7% and accounted for two-thirds of the total. The remaining third comes from one-time events, such as notifications of special shareholder meetings and distributing information when mutual funds change managers.
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Without one-time items, Broadridge earned $114.6 million, or $1.16 a share, in its fiscal 2014 fourth quarter, which ended June 30, 2014. That’s up 1.5% from $142.4 million, or $1.15 a share, a year earlier.
Overall revenue gained 2.4%, to $885.9 million from $865.1 million. Revenue from contracts that pay recurring fees rose 7% and accounted for two-thirds of the total. The remaining third comes from one-time events, such as notifications of special shareholder meetings and distributing information when mutual funds change managers.
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IAMGOLD $2.80 (Toronto symbol IMG; TSINetwork Rating: Speculative) (1-888-464-9999; www.iamgold.com; Shares outstanding: 376.7 million; Market cap: $1.0 billion; No dividends paid) is selling its Niobec niobium mine in Quebec’s Saguenay- Lac-Saint-Jean region. When used as an additive, niobium makes steel stronger, more heat-resistant and easier to weld.
The company will receive $500 million U.S. when the sale closes later this year. It will get another $30 million U.S. when an adjacent deposit of rare earth elements goes into production.
Following the sale, the company will hold cash and gold bullion worth over $800 million U.S. That puts IAMGold in a strong position to pay down its long-term debt of $641 million U.S.
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The company will receive $500 million U.S. when the sale closes later this year. It will get another $30 million U.S. when an adjacent deposit of rare earth elements goes into production.
Following the sale, the company will hold cash and gold bullion worth over $800 million U.S. That puts IAMGold in a strong position to pay down its long-term debt of $641 million U.S.
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AMERIGO RESOURCES $0.37 (Toronto symbol ARG; TSINetwork Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 173.7 million; Market cap: $66.0 million; No dividends paid) processes copper and molybdenum from waste rock at Chile’s El Teniente, the world’s largest underground copper mine. This includes rock from the mine’s current production and tailings from the nearby Colihues deposit. This contract runs at least through 2037.
Amerigo gets 94% of its revenue by processing copper. The remaining 6% comes from molybdenum.
In the quarter ended June 30, 2014, Amerigo’s copper output fell 2.2%, to 9.34 million pounds from 9.55 million a year earlier. Molybdenum production declined 13.5%, to 152,340 pounds from 176,845.
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Amerigo gets 94% of its revenue by processing copper. The remaining 6% comes from molybdenum.
In the quarter ended June 30, 2014, Amerigo’s copper output fell 2.2%, to 9.34 million pounds from 9.55 million a year earlier. Molybdenum production declined 13.5%, to 152,340 pounds from 176,845.
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AURICO GOLD $4.36 (Toronto symbol AUQ; TSINetwork Rating: Speculative) (604-681-2802; www.auricogold.com; Shares outstanding: 248.5 million; Market cap: $1.0 billion; Dividend yield: 0.4%) operates the El Chanate gold mine in Mexico. The company also started up its Young-Davidson gold project in northern Ontario last year. It’s now at full production.
In the three months ended June 30, 2014, AuRico’s production jumped 47.2%, to 56,198 ounces from 38,186 ounces a year earlier. That increased its revenue by 31.0%, to $75.5 million from $57.7 million.
Cash flow per share declined to $0.05 from $0.08. The company’s costs rose as it moved from open pit to underground mining at Young-Davidson, but they should fall as AuRico completes the mine’s new infrastructure.
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In the three months ended June 30, 2014, AuRico’s production jumped 47.2%, to 56,198 ounces from 38,186 ounces a year earlier. That increased its revenue by 31.0%, to $75.5 million from $57.7 million.
Cash flow per share declined to $0.05 from $0.08. The company’s costs rose as it moved from open pit to underground mining at Young-Davidson, but they should fall as AuRico completes the mine’s new infrastructure.
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