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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CARFINCO FINANCIAL GROUP $11.35 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888-486-4356; www.carfinco.com; Shares outstanding: 26.5 million; Market cap: $299.7 million; Dividend yield: 4.2%) is the subject of a friendly takeover bid from Banco Santander of Spain (ADR symbol SAN on New York). The offer is for $11.25 a share in cash. Carfinco will also pay a special dividend of up to $0.10 a share when the deal closes.
Carfinco is now trading at $11.35, which is equal to the value of the cash and special dividend. Carfinco’s directors and executive officers, who collectively own 12.9% of the company, have agreed to support the deal.
However, Carfinco could attract a rival bid, or significant shareholders, such as mutual funds, could hold out for a higher offer. We’ll say more as the takeover progresses, but for now Carfinco is a hold.
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Carfinco is now trading at $11.35, which is equal to the value of the cash and special dividend. Carfinco’s directors and executive officers, who collectively own 12.9% of the company, have agreed to support the deal.
However, Carfinco could attract a rival bid, or significant shareholders, such as mutual funds, could hold out for a higher offer. We’ll say more as the takeover progresses, but for now Carfinco is a hold.
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WESTJET AIRLINES $33.05 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 127.8 million; Market cap: $4.2 billion; Dividend yield: 1.5%) serves 90 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 107 modern Boeing 737s are 30% more fuel efficient than older jets.
In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 13 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers.
In the three months ended June 30, 2014, WestJet’s earnings rose 15.9%, to a second-quarter record of $51.8 million from $44.7 million a year earlier. Earnings per share gained 17.6%, to $0.40 from $0.34, on fewer shares outstanding. This was WestJet’s 37th consecutive quarter of profitability.
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In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 13 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers.
In the three months ended June 30, 2014, WestJet’s earnings rose 15.9%, to a second-quarter record of $51.8 million from $44.7 million a year earlier. Earnings per share gained 17.6%, to $0.40 from $0.34, on fewer shares outstanding. This was WestJet’s 37th consecutive quarter of profitability.
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FIRSTSERVICE CORP. $59.35 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 36.6 million; Market cap: $2.1 billion; Dividend yield: 0.7%) serves the following areas of the real estate market: commercial real estate, residential property management and property improvement. The company has more than 24,000 employees worldwide.
In the quarter ended June 30, 2014, FirstService’s revenue rose 14.7%, to $660.7 million from $576.1 million a year earlier (all figures except share prices in U.S. dollars). Excluding one-time items, earnings per share were $0.74, up 29.8% from $0.57.
Revenue rose at all three of FirstService’s divisions: Colliers International (commercial real estate), up 22%; FirstService Residential (residential property management), up 9%; and FirstService Brands (property services), up 12%. FirstService Brands operates Paul Davis Restoration, California Closets and CertaPro Painters.
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In the quarter ended June 30, 2014, FirstService’s revenue rose 14.7%, to $660.7 million from $576.1 million a year earlier (all figures except share prices in U.S. dollars). Excluding one-time items, earnings per share were $0.74, up 29.8% from $0.57.
Revenue rose at all three of FirstService’s divisions: Colliers International (commercial real estate), up 22%; FirstService Residential (residential property management), up 9%; and FirstService Brands (property services), up 12%. FirstService Brands operates Paul Davis Restoration, California Closets and CertaPro Painters.
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STUART OLSON INC. $9.51 (Toronto symbol SOX; TSINetwork Rating: Speculative) (780-454-3667; www.stuartolson.com; Shares outstanding: 24.9 million; Market cap: $270.0 million; Dividend yield: 5.0%) has agreed to sell its Broda Construction division to TriWest Capital Partners and Broda’s senior management for $39 million in cash.
Broda is a heavy construction firm that specializes in soil excavation, civil construction and concrete production.
The sale will let Stuart Olson streamline its operations and focus on its core businesses, including building construction, electrical contracting and industrial insulation.
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Broda is a heavy construction firm that specializes in soil excavation, civil construction and concrete production.
The sale will let Stuart Olson streamline its operations and focus on its core businesses, including building construction, electrical contracting and industrial insulation.
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COMPUTER MODELLING GROUP $12.00 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgl.ca; Shares outstanding: 78.8 million; Market cap: $945.5 million; Dividend yield: 3.3%) sells software and consulting services that help oil and gas producers use advanced recovery techniques to get more out of their wells. It has clients in over 50 countries and offices in Calgary, Houston, London, Caracas, Bogota, Kuala Lumpur and Dubai.
In the quarter ended June 30, 2014, Computer Modelling’s revenue rose 7.9%, to $19.6 million from $18.1 million a year earlier. Software licence sales (89% of total revenue) rose 6.8%, and consulting and professional services revenue (11%) increased 17.9%, thanks to new projects and a large consulting contract.
Even so, earnings fell 11.8%, to $6.2 million, or $0.08 a share, from $7.1 million or $0.09. The company hired more employees to support its growth. It also raised its research spending by 21.3%, to $4.2 million (or 22% of revenue) from $3.5 million (19%).
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In the quarter ended June 30, 2014, Computer Modelling’s revenue rose 7.9%, to $19.6 million from $18.1 million a year earlier. Software licence sales (89% of total revenue) rose 6.8%, and consulting and professional services revenue (11%) increased 17.9%, thanks to new projects and a large consulting contract.
Even so, earnings fell 11.8%, to $6.2 million, or $0.08 a share, from $7.1 million or $0.09. The company hired more employees to support its growth. It also raised its research spending by 21.3%, to $4.2 million (or 22% of revenue) from $3.5 million (19%).
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PASON SYSTEMS $32.79 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.7 million; Market cap: $2.7 billion; Dividend yield: 2.1%) is trading near all-time highs as it continues to benefit from the boom in U.S. shale oil and gas drilling.
Pason rents equipment for monitoring and managing oil and gas rigs. It also sells communication technology, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas producers and drilling contractors in Canada, the U.S., Mexico, Argentina and Australia.
In the three months ended June 30, 2014, the company’s revenue rose 26.1%, to $103.8 million from $82.4 million a year earlier. Pason saw higher sales in all markets, but especially in the U.S.
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Pason rents equipment for monitoring and managing oil and gas rigs. It also sells communication technology, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas producers and drilling contractors in Canada, the U.S., Mexico, Argentina and Australia.
In the three months ended June 30, 2014, the company’s revenue rose 26.1%, to $103.8 million from $82.4 million a year earlier. Pason saw higher sales in all markets, but especially in the U.S.
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AMAZON.COM $324.00 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206- 266-1000; www.amazon.com; Shares outstanding: 462.0 million; Market cap: $149.7 billion; No dividends paid) has acquired gaming network Twitch Interactive for about $970 million in cash. The company reportedly outbid Google.
Twitch, which was founded in 2011, is a popular Internet video channel for broadcasting and watching people playing video games. The website is estimated to be the fourth-largest source of U.S. Internet traffic, behind Netflix, Google and Apple.
Gaming—especially mobile gaming—is a new area of focus for Amazon. Twitch is a leader, with more than 55 million users. It generates revenue from both subscriptions and advertising.
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Twitch, which was founded in 2011, is a popular Internet video channel for broadcasting and watching people playing video games. The website is estimated to be the fourth-largest source of U.S. Internet traffic, behind Netflix, Google and Apple.
Gaming—especially mobile gaming—is a new area of focus for Amazon. Twitch is a leader, with more than 55 million users. It generates revenue from both subscriptions and advertising.
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SASOL LTD. (ADR) $56.49 (New York symbol SSL; TSINetwork Rating: Extra Risk) (082-883-9697; www.sasol.com; ADRs outstanding: 650.6 million; Market cap: $38.4 billion; Dividend yield: 4.5%) has developed a technology to convert coal and natural gas into motor fuels.
The company is the world’s largest producer of fuel from coal at its Secunda, South Africa, facility. It also makes synthetic fuels from natural gas at plants in Qatar and Nigeria. As well, Sasol produces chemicals, oil and gas in Africa. It’s also South Africa’s thirdlargest coal producer.
In its 2014 fiscal year, which ended June 30, 2014, Sasol’s revenue rose 19.3%, to 202.7 billion South African rand (1 rand = $0.1039 U.S.) from 169.9 billion rand in fiscal 2013. Earnings per ADR rose 14.3%, to a record 60.16 rand from 52.62 rand.
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The company is the world’s largest producer of fuel from coal at its Secunda, South Africa, facility. It also makes synthetic fuels from natural gas at plants in Qatar and Nigeria. As well, Sasol produces chemicals, oil and gas in Africa. It’s also South Africa’s thirdlargest coal producer.
In its 2014 fiscal year, which ended June 30, 2014, Sasol’s revenue rose 19.3%, to 202.7 billion South African rand (1 rand = $0.1039 U.S.) from 169.9 billion rand in fiscal 2013. Earnings per ADR rose 14.3%, to a record 60.16 rand from 52.62 rand.
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CHESAPEAKE ENERGY $25.35 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 665.8 million; Market cap: $16.9 billion; Dividend yield: 1.4%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 72% gas and 28% oil.
Chesapeake’s shares have nearly doubled since mid- 2012, when activist investor Carl Icahn bought a stake in the firm. Icahn, who has a history of pushing companies to make changes that raise shareholder value, subsequently replaced four of Chesapeake’s eight board members with his nominees. The company also pushed out controversial co-founder, CEO and chairman Aubrey K. McClendon.
The company continues to restructure by selling non-essential properties and assets. That lets it pay down debt and focus on areas with strong potential.
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Chesapeake’s shares have nearly doubled since mid- 2012, when activist investor Carl Icahn bought a stake in the firm. Icahn, who has a history of pushing companies to make changes that raise shareholder value, subsequently replaced four of Chesapeake’s eight board members with his nominees. The company also pushed out controversial co-founder, CEO and chairman Aubrey K. McClendon.
The company continues to restructure by selling non-essential properties and assets. That lets it pay down debt and focus on areas with strong potential.
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ALIMENTATION COUCHE-TARD $35.09 (Toronto symbol ATD.B; TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 565.8 million; Market cap: $20.0 billion; Dividend yield: 0.5%) reported higher sales and record earnings in the latest quarter, as well as a dividend increase.
In the three months ended July 20, 2014, Couche-Tard’s sales rose 3.2%, to $9.2 billion from $8.9 billion a year earlier. Per-share earnings gained 23.1%, to $0.48 from $0.39.
The company raised its quarterly dividend by 12.5% with the September 2014 payment, to $0.045 a share from $0.04. The stock now yields 0.5%.
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In the three months ended July 20, 2014, Couche-Tard’s sales rose 3.2%, to $9.2 billion from $8.9 billion a year earlier. Per-share earnings gained 23.1%, to $0.48 from $0.39.
The company raised its quarterly dividend by 12.5% with the September 2014 payment, to $0.045 a share from $0.04. The stock now yields 0.5%.
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