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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FAIR ISAAC CORP. $57 (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.
The company recently repurchased $150.0 million of its shares under a buyback plan that ended in July 2014. Under its new authorization, it can buy back up to $250.0 million of shares. That’s equal to 14% of its market cap. There is no time limit for these buybacks.
Fair Isaac is a hold.
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The company recently repurchased $150.0 million of its shares under a buyback plan that ended in July 2014. Under its new authorization, it can buy back up to $250.0 million of shares. That’s equal to 14% of its market cap. There is no time limit for these buybacks.
Fair Isaac is a hold.
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ABB LTD. ADRs $23 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $52.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.5%; TSINetwork Rating: Above Average; www.abb.com) makes transformers, transmission systems and circuit breakers for electrical utilities. The Switzerland-based firm also produces automation systems and robotics that industrial clients use to improve their productivity.
The company has developed new technology that will let its cables transmit up to 2,600 megawatts of electricity. That’s more than double what today’s highvoltage lines can carry. Demand for these new cables should be strong, particularly from operators of offshore wind farms and oil and gas drilling platforms.
ABB is a buy.
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The company has developed new technology that will let its cables transmit up to 2,600 megawatts of electricity. That’s more than double what today’s highvoltage lines can carry. Demand for these new cables should be strong, particularly from operators of offshore wind farms and oil and gas drilling platforms.
ABB is a buy.
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MCDONALD’S CORP. $95 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 981.9 million; Market cap: $93.3 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.mcdonalds.com) reports that same-store sales at its U.S. outlets fell 3.2% in July 2014 from the same month a year earlier. That’s partly because younger diners are switching to fast-casual dining chains that offer fresher foods. In response, McDonald’s continues to upgrade its menu with healthier options, such as vegetable tortilla wraps.
The company hopes these new menu items are as successful as its improved coffee lineup— since 2009, its coffee sales have jumped 70%. The company now plans to start selling its coffee in supermarkets under the McCafe brand. It will offer a variety of blends and flavours, in bags as well as single-serve pods for home brewing machines.
McDonald’s is a buy.
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The company hopes these new menu items are as successful as its improved coffee lineup— since 2009, its coffee sales have jumped 70%. The company now plans to start selling its coffee in supermarkets under the McCafe brand. It will offer a variety of blends and flavours, in bags as well as single-serve pods for home brewing machines.
McDonald’s is a buy.
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DIAGEO PLC ADRs $119 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 628.1 million; Market cap: $74.7 billion; Price-to-sales ratio: 4.4; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.diageo.com) reported that its sales fell 9.2% in its 2014 fiscal year, which ended June 30, 2014, to 10.3 billion British pounds from 11.3 billion in fiscal 2013 (1 pound=$1.80 Canadian). That’s mainly due to unfavourable currency exchange rates. Earnings per ADR declined 7.3%, to 3.82 pounds from 4.12 (each ADR represents four common shares).
The company recently increased its stake in United Spirits, India’s largest alcoholic-beverage maker, to 54.78% from 28.78%. That should push up Diageo’s fiscal 2015 earnings to 4.64 poundsper ADR. The stock trades at 15.5 times that forecast. However, exchange rate volatility could continue to weigh on the stock price.
Diageo is still a hold.
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The company recently increased its stake in United Spirits, India’s largest alcoholic-beverage maker, to 54.78% from 28.78%. That should push up Diageo’s fiscal 2015 earnings to 4.64 poundsper ADR. The stock trades at 15.5 times that forecast. However, exchange rate volatility could continue to weigh on the stock price.
Diageo is still a hold.
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NVIDIA CORP. $19 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 541.9 million; Market cap: $10.3 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.8%; TSINetwork Rating: Average; www.nvidia.com) still gets most of its revenue from graphic chips for computer gaming, but is developing new chips for mobile devices and data centres.
In its fiscal 2015 second quarter, which ended July 27, 2014, Nvidia’s revenue rose 12.9%, to $1.1 billion from $977.2 million a year earlier. Sales of graphic chips (80% of the total) rose 2.3%. However, sales of its Tegra mobile chips jumped 200.0%, because automakers are now using them to power in-car entertainment systems.
Earnings gained 30.1%, to $173.4 million, or $0.30 a share. A year earlier, the company earned $133.3 million, or $0.23 a share. Nvidia spent a high 30.6% of its revenue on research in the latest quarter.
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In its fiscal 2015 second quarter, which ended July 27, 2014, Nvidia’s revenue rose 12.9%, to $1.1 billion from $977.2 million a year earlier. Sales of graphic chips (80% of the total) rose 2.3%. However, sales of its Tegra mobile chips jumped 200.0%, because automakers are now using them to power in-car entertainment systems.
Earnings gained 30.1%, to $173.4 million, or $0.30 a share. A year earlier, the company earned $133.3 million, or $0.23 a share. Nvidia spent a high 30.6% of its revenue on research in the latest quarter.
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TEXAS INSTRUMENTS INC. $48 (Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $52.8 billion; Price-to-sales ratio: 4.2; Dividend yield: 2.5%; TSINetwork Rating: Average; 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.
In the quarter ended June 30, 2014, the company’s earnings rose 3.5%, to $683 million from $660 million a year earlier. Texas Instruments spent $743 million on share buybacks during the quarter. As a result, earnings per share gained 6.9%, to $0.62 from $0.58.
Revenue rose 8.0%, to $3.3 billion from $3.0 billion. Strong demand for analog and embedded processor chips (which perform mathematical calculations) offset lower sales of other chips and calculators.
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In the quarter ended June 30, 2014, the company’s earnings rose 3.5%, to $683 million from $660 million a year earlier. Texas Instruments spent $743 million on share buybacks during the quarter. As a result, earnings per share gained 6.9%, to $0.62 from $0.58.
Revenue rose 8.0%, to $3.3 billion from $3.0 billion. Strong demand for analog and embedded processor chips (which perform mathematical calculations) offset lower sales of other chips and calculators.
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BRIGGS & STRATTON CORP. $20 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 46.7 million; Market cap: $934.0 million; Priceto-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is buying Allmand Bros., a privately held Nebraska firm that makes portable lighting products and heaters for construction companies and other industrial users. The purchase will cut Briggs’reliance on weather-dependent products, like lawn mower engines and snow blowers.
The company will pay $62 million for Allmand when it completes the purchase in the next few weeks. The acquisition will add $80 million to Briggs’annual sales.
To put these figures in context, the company’s sales fell 0.2% in its 2014 fiscal year, which ended June 30, 2014, to $1.859 billion from $1.862 billion in fiscal 2013. The lack of major storms in 2014 hurt sales of portable power generators. Overall earnings declined 13.4%, to $39.0 million from $45.1 million. Per-share earnings fell 11.8%, to $0.82 from $0.93, on fewer shares outstanding.
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The company will pay $62 million for Allmand when it completes the purchase in the next few weeks. The acquisition will add $80 million to Briggs’annual sales.
To put these figures in context, the company’s sales fell 0.2% in its 2014 fiscal year, which ended June 30, 2014, to $1.859 billion from $1.862 billion in fiscal 2013. The lack of major storms in 2014 hurt sales of portable power generators. Overall earnings declined 13.4%, to $39.0 million from $45.1 million. Per-share earnings fell 11.8%, to $0.82 from $0.93, on fewer shares outstanding.
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C.R. BARD INC. $149 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 74.6 million; Market cap: $11.1 billion; Price-to-sales ratio: 3.7; Dividend yield: 0.6%; TSINetwork Rating: Above Average; www.crbard.comtarget=”_blank”) continues to develop successful new medical devices. For example, it should soon receive approval to start selling a catheter that uses a drug-coated balloon to treat clogged arteries. Products like this are helping Bard offset the 2.3% tax it has to pay on certain medical devices it sells in the U.S. under Obamacare.
In the second quarter of 2014, Bard’s earnings rose 22.0%, to $160.7 million from $131.7 million a year earlier. Earnings per share gained 29.6%, to $2.06 from $1.59. Revenue rose 8.8%, to $827.1 million from $759.9 million. Bard spends around 10% of its revenue on research.
The company recently increased its quarterly dividend by 4.8%, to $0.22 a share from $0.21. The stock has gained 30% in the past year, so the new annual rate of $0.88 yields just 0.6%.
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In the second quarter of 2014, Bard’s earnings rose 22.0%, to $160.7 million from $131.7 million a year earlier. Earnings per share gained 29.6%, to $2.06 from $1.59. Revenue rose 8.8%, to $827.1 million from $759.9 million. Bard spends around 10% of its revenue on research.
The company recently increased its quarterly dividend by 4.8%, to $0.22 a share from $0.21. The stock has gained 30% in the past year, so the new annual rate of $0.88 yields just 0.6%.
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ALCOA INC. $17 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.2 billion; Market cap: $20.4 billion; Price-to-sales ratio: 1.7; Dividend yield: 0.7%; TSINetwork Rating: Average; www.alcoa.com) continues to close older, inefficient smelters in response to weak aluminum prices.
The company now plans to shut down its Portovesme smelter in Italy, which will cut Alcoa’s global smelting capacity by 4%.
Severance payments and other costs will cut the company’s earnings by around $0.15 a share in the third quarter of 2014. To put that in context, Alcoa earned $0.18 a share before one-time items in the second quarter.
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The company now plans to shut down its Portovesme smelter in Italy, which will cut Alcoa’s global smelting capacity by 4%.
Severance payments and other costs will cut the company’s earnings by around $0.15 a share in the third quarter of 2014. To put that in context, Alcoa earned $0.18 a share before one-time items in the second quarter.
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CENOVUS ENERGY INC. $31 (New York symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 756.5 million; Market cap: $23.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.2%; TSINetwork Rating: Average; www.cenovus.com) gets 40% of its output from its Alberta oil sands projects. Conventional oil and gas wells supply the other 60%.
U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects. These properties produce heavy bitumen, which Cenovus ships to its 50%-owned refineries in Illinois and Texas.
Phillips 66 (New York symbol PSX) owns the other 50% of these refineries. The company produced 286,188 barrels of oil equivalent a day (70% oil and 30% gas) in the second quarter of 2014, up 9.9% from 260,460 a year ago.
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U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects. These properties produce heavy bitumen, which Cenovus ships to its 50%-owned refineries in Illinois and Texas.
Phillips 66 (New York symbol PSX) owns the other 50% of these refineries. The company produced 286,188 barrels of oil equivalent a day (70% oil and 30% gas) in the second quarter of 2014, up 9.9% from 260,460 a year ago.
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