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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LEON’S FURNITURE LTD. $14.00 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 71.0 million; Market cap: $1.0 billion; Dividend yield: 2.9%) has steadily opened new stores, growing from 27 in 2003 to 79 today.
But the company more than quadrupled in size overnight with its March 2013 purchase of its main rival, The Brick, for $700 million. The Brick has 222 locations across Canada. The chains continue to operate separately.
In the quarter ended June 30, 2014, the company’s sales fell 1.3%, to $474.5 million from $480.6 million a year earlier. The year-ago quarter included the first full three months of sales from The Brick. On a samestore basis, sales declined 1.3%.
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But the company more than quadrupled in size overnight with its March 2013 purchase of its main rival, The Brick, for $700 million. The Brick has 222 locations across Canada. The chains continue to operate separately.
In the quarter ended June 30, 2014, the company’s sales fell 1.3%, to $474.5 million from $480.6 million a year earlier. The year-ago quarter included the first full three months of sales from The Brick. On a samestore basis, sales declined 1.3%.
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Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on a wide range of investing topics. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “When you focus on investment quality and favour growth stocks over momentum stocks, you multiply your chances of success with aggressive stocks.”...
VERESEN $18.48 (Toronto symbol VSN; Shares outstanding: 220.3 million; Market cap: $4.1 billion; TSINetwork Rating: Average; Dividend yield: 5.4%) owns pipelines, power plants and gas-processing facilities across North America.
A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Veresen also owns the Alberta Ethane Gathering System, 42.7% of the Aux Sable NGL plant, and the Hythe/Steeprock natural gas gathering and processing complex in the Cutbank Ridge region of Alberta and B.C. To diversify, the company is expanding into power generation, including hydroelectric facilities, wind farms and natural gas-fired plants.
Veresen continues to move ahead with its plan to ship gas from Canada to its proposed $6.8-billion Jordan Cove liquefied natural gas plant in Oregon for export to Asia. If regulators give final approval, the project could start up in 2019.
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A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Veresen also owns the Alberta Ethane Gathering System, 42.7% of the Aux Sable NGL plant, and the Hythe/Steeprock natural gas gathering and processing complex in the Cutbank Ridge region of Alberta and B.C. To diversify, the company is expanding into power generation, including hydroelectric facilities, wind farms and natural gas-fired plants.
Veresen continues to move ahead with its plan to ship gas from Canada to its proposed $6.8-billion Jordan Cove liquefied natural gas plant in Oregon for export to Asia. If regulators give final approval, the project could start up in 2019.
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Every Thursday we bring you “Best U.S. Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster. We prefer chipmakers that dominate their niche markets. Texas Instruments cuts its risk with a variety of niche products and customers. TEXAS INSTRUMENTS INC. (Nasdaq symbol TXN; www.ti.com) used to focus on chips for cellphones, but has shifted to analog chips, which convert inputs like touch, sound and pressure into electronic signals that computers can understand. Manufacturers use these chips in a variety of products, including cars, medical devices and appliances....
CONAGRA FOODS INC. $34 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 424.5 million; Market cap: $14.4 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.conagra foods.com) makes a wide variety of packaged foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Peter Pan peanut butter, Orville Redenbacher popcorn and Reddiwip whipped cream. Consumers account for 70% of ConAgra’s sales. Businesses, like restaurants and other food makers, provide the remaining 30%.
Sales rose 9.8%, from $12.1 billion in 2010 to $13.3 billion in 2012 (fiscal years end May 31).
Ralcorp acquisition boosted results
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Sales rose 9.8%, from $12.1 billion in 2010 to $13.3 billion in 2012 (fiscal years end May 31).
Ralcorp acquisition boosted results
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GENERAL MILLS INC. $50 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 610.1 million; Market cap: $30.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.generalmills.com) earned $345.2 million in its fiscal 2015 first quarter, which ended August 24, 2014. That’s down 24.8% from $459.3 million a year earlier. Per-share earnings fell 21.4%, to $0.55 from $0.70, on fewer shares outstanding.
Without unusual items, such as gains and losses on hedging contracts, earnings per share declined 12.9%, to $0.61 from $0.70. The company launched over 250 new products in the quarter, which increased its operating and advertising costs. Sales fell 2.4%, to $4.3 billion from $4.4 billion, mainly due to weak demand for breakfast cereal in the U.S.
The company expects its new products to boost its sales by 5% in fiscal 2015. General Mills also estimates that a new cost-cutting plan, which includes closing plants, will save it $400 million in the current fiscal year. In the longer term, streamlining its other operations should cut its yearly costs by $152 million by 2017.
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Without unusual items, such as gains and losses on hedging contracts, earnings per share declined 12.9%, to $0.61 from $0.70. The company launched over 250 new products in the quarter, which increased its operating and advertising costs. Sales fell 2.4%, to $4.3 billion from $4.4 billion, mainly due to weak demand for breakfast cereal in the U.S.
The company expects its new products to boost its sales by 5% in fiscal 2015. General Mills also estimates that a new cost-cutting plan, which includes closing plants, will save it $400 million in the current fiscal year. In the longer term, streamlining its other operations should cut its yearly costs by $152 million by 2017.
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SHERWIN-WILLIAMS CO. $221 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 97.8 million; Market cap: $21.6 billion; Price-to-sales ratio: 2.0; Yield: 1.0%; TSINetwork Rating: Above Average; www.sherwin-williams.com) reported that its sales rose 12.1% in the quarter ended June 30, 2014, to $3.0 billion from $2.7 billion a year ago. About 40% of that gain came from Mexican paint maker Comex’s U.S. and Canadian assets, which Sherwin bought for $165 million in September 2013.
Earnings rose 13.3%, to $291.4 million from $257.3 million. Per-share earnings gained 19.5%, to $2.94 from $2.46, on fewer shares outstanding.
The company will likely earn $8.64 a share in 2014, up 15.4% from 2013, but the stock trades at a high 25.6 times that forecast.
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Earnings rose 13.3%, to $291.4 million from $257.3 million. Per-share earnings gained 19.5%, to $2.94 from $2.46, on fewer shares outstanding.
The company will likely earn $8.64 a share in 2014, up 15.4% from 2013, but the stock trades at a high 25.6 times that forecast.
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YUM! BRANDS INC. $72 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 439.7 million; Market cap: $31.7 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.yum.com) plans to open two restaurants in Dallas called Bahn Shop, which specialize in Vietnamese banh mi sandwiches. The company is also testing a new fast food outlet called Super Chix, which features chicken sandwiches.
If successful, new banners like these would help Yum offset slowing sales at its U.S. KFC and Pizza Hut restaurants. Yum also raised its quarterly dividend by 10.8%, to $0.41 a share from $0.37. The new annual rate of $1.64 yields 2.3%.
Yum Brands is a buy.
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If successful, new banners like these would help Yum offset slowing sales at its U.S. KFC and Pizza Hut restaurants. Yum also raised its quarterly dividend by 10.8%, to $0.41 a share from $0.37. The new annual rate of $1.64 yields 2.3%.
Yum Brands is a buy.
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CISCO SYSTEMS INC. $25 (Nasdaq symbol CSCO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.1 billion; Market cap: $127.5 billion; Price-to-sales ratio: 2.8; Dividend yield 3.0%; TSINetwork Rating: Average; www.cisco.com) is buying Metacloud, a privately held California firm whose software helps companies manage data they store on remote servers.
The company didn’t reveal the purchase price. However, earlier this year Cisco earmarked $1 billion for its Intercloud initiative, which aims to deliver cloud computing services through a network of outside companies instead of building its own system. Using partners makes it easier for Cisco to expand to other countries and comply with local laws about data privacy and other online issues.
Cisco is a buy.
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The company didn’t reveal the purchase price. However, earlier this year Cisco earmarked $1 billion for its Intercloud initiative, which aims to deliver cloud computing services through a network of outside companies instead of building its own system. Using partners makes it easier for Cisco to expand to other countries and comply with local laws about data privacy and other online issues.
Cisco is a buy.
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MTS SYSTEMS CORP. $69 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.1 million; Market cap: $1.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.7%; TSINetwork Rating: Average; www.mts.com) recently paid $16.7 million for Roehrig Engineering, which has developed an electromagnetic technology that tests shock absorbers and other industrial equipment more accurately than traditional methods. These products look like a nice fit with MTS’s existing automotive testing equipment.
In its fiscal 2014 third quarter, which ended June 28, 2014, MTS’s revenue rose 7.7%, to $145.5 million from $135.1 million a year earlier. Overall earnings improved 9.7%, to $12.7 million from $11.5 million a year earlier. Earnings per share gained 13.9%, to $0.82 from $0.72, on fewer shares outstanding. MTS spends 4% of its revenue on research.
The stock is up 129% in the past five years and now trades at 21.0 times MTS’s projected fiscal 2014 earnings of $3.28 a share. That’s high p/e ratio for a firm that serves the highly cyclical automotive and aerospace industries.
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In its fiscal 2014 third quarter, which ended June 28, 2014, MTS’s revenue rose 7.7%, to $145.5 million from $135.1 million a year earlier. Overall earnings improved 9.7%, to $12.7 million from $11.5 million a year earlier. Earnings per share gained 13.9%, to $0.82 from $0.72, on fewer shares outstanding. MTS spends 4% of its revenue on research.
The stock is up 129% in the past five years and now trades at 21.0 times MTS’s projected fiscal 2014 earnings of $3.28 a share. That’s high p/e ratio for a firm that serves the highly cyclical automotive and aerospace industries.
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