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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TERADATA CORP. $43 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 157.7 million; Market cap: $6.8 billion; Price-to-sales ratio: 2.6; No dividends paid; TSINetwork Rating: Average; www.teradata.com) was a wholly owned subsidiary of NCR Corp. until it was spun off on October 1, 2007. Teradata is up 65% since then.
The company’s technology captures and stores large amounts of a business’s data, including its sales and inventory. Teradata then analyzes this information and identifies buying habits and trends, which helps its clients improve their decision-making.
In the three months ended March 31, 2014, the company’s earnings rose 19.2%, to $87 million from $73 million a year earlier. Teradata spent $86 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share gained 25.6%, to $0.54 from $0.43. Revenue rose 7.0%, to $628 million from $587 million.
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The company’s technology captures and stores large amounts of a business’s data, including its sales and inventory. Teradata then analyzes this information and identifies buying habits and trends, which helps its clients improve their decision-making.
In the three months ended March 31, 2014, the company’s earnings rose 19.2%, to $87 million from $73 million a year earlier. Teradata spent $86 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share gained 25.6%, to $0.54 from $0.43. Revenue rose 7.0%, to $628 million from $587 million.
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AGILENT TECHNOLOGIES INC. $57 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 333.0 million; Market cap: $19.0 billion; Price-to-sales ratio: 2.8; Dividend yield: 0.9%; TSINetwork Rating: Average; www.agilent.com) was a unit of Hewlett- Packard until 1999, when Hewlett spun it off as a separate firm. Agilent now plans to break itself into two publicly traded companies in November 2014.
One firm will keep the Agilent name and focus on testing equipment for medical-research labs. This business supplies 60% of Agilent’s revenue and will pay a dividend comparable to the current 0.9% yield.
The second company, called Keysight Technologies, will make testing systems for improving electronics, such as cellphones and computer equipment. Keysight will not pay a dividend, at least initially.
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One firm will keep the Agilent name and focus on testing equipment for medical-research labs. This business supplies 60% of Agilent’s revenue and will pay a dividend comparable to the current 0.9% yield.
The second company, called Keysight Technologies, will make testing systems for improving electronics, such as cellphones and computer equipment. Keysight will not pay a dividend, at least initially.
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BAXTER INTERNATIONAL INC. $76 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 542.6 million; Market cap: $41.2 billion; Price-to-sales ratio: 2.7; Dividend yield: 2.7%; TSINetwork Rating: Average; www.baxter.com) recently announced that it will split into two separate companies.
One firm will focus on medical devices, such as intravenous pumps and kidney dialysis equipment. This business currently provides 60% of Baxter’s revenue. The other company will make biopharmaceuticals, including vaccines and hemophilia drugs.
In mid-2015, Baxter will hand out shares in the biopharmaceutical firm to its investors as a tax-deferred dividend.
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One firm will focus on medical devices, such as intravenous pumps and kidney dialysis equipment. This business currently provides 60% of Baxter’s revenue. The other company will make biopharmaceuticals, including vaccines and hemophilia drugs.
In mid-2015, Baxter will hand out shares in the biopharmaceutical firm to its investors as a tax-deferred dividend.
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HILLSHIRE BRANDS CO. $63 (New York symbol HSH; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 123.4 million; Market cap: $7.8 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.1%; TSINetwork Rating: Average; www.hillshirebrands.com) took its current form on June 28, 2012, when the old Sara Lee Corp. split into two separate companies: Hillshire and European coffee maker D.E. Master Blenders.
D.E. Master accepted a $16.50-a-share takeover offer in June 2013, for a 55% gain since the Sara Lee breakup.
Hillshire makes a variety of packaged meat products. Its main brands include Ball Park hot dogs, Jimmy Dean sausages and Hillshire Farm deli meats. Other foods include Sara Lee frozen desserts and Chef Pierre pies.
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D.E. Master accepted a $16.50-a-share takeover offer in June 2013, for a 55% gain since the Sara Lee breakup.
Hillshire makes a variety of packaged meat products. Its main brands include Ball Park hot dogs, Jimmy Dean sausages and Hillshire Farm deli meats. Other foods include Sara Lee frozen desserts and Chef Pierre pies.
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KRAFT FOODS GROUP INC. $57 (Nasdaq symbol KRFT; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 595.3 million; Market cap: $33.9 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.kraftfoodsgroup.com) makes a variety of grocery products, including Kraft macaroni and cheese, Maxwell House coffee, Oscar Mayer meats, Philadelphia cream cheese, Jell-O desserts and Miracle Whip salad dressing.
Following the split from Mondelez, Kraft began consolidating plants and eliminating less-profitable products. The company expects to spend $625 million by the time it completes the plan in late 2014.
In the three months ended June 28, 2014, Kraft’s earnings fell 41.9%, to $482 million, or $0.80 a share. A year earlier, it earned $829 million, or $1.38 a share. If you disregard unusual items, earnings per share increased 7.9%, to $0.82 from $0.76.
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Following the split from Mondelez, Kraft began consolidating plants and eliminating less-profitable products. The company expects to spend $625 million by the time it completes the plan in late 2014.
In the three months ended June 28, 2014, Kraft’s earnings fell 41.9%, to $482 million, or $0.80 a share. A year earlier, it earned $829 million, or $1.38 a share. If you disregard unusual items, earnings per share increased 7.9%, to $0.82 from $0.76.
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MONDELEZ INTERNATIONAL INC. $37 (Nasdaq symbol MDLZ; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.7 billion; Market cap: $62.9 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.mondelezinternational.com) took its current form on October 1, 2012, when the old Kraft Foods Inc. broke itself into two publicly traded companies: Mondelez International and Kraft Foods Group.
Mondelez makes cookies and biscuits (Oreo, Chips Ahoy, Ritz), chocolate bars (Cadbury, Toblerone) and gum and candy (Trident, Chiclets and Halls cough drops). It also makes coffee and other beverages, as well as grocery and cheese products for overseas markets.
The company has agreed to merge its packaged coffee business with European coffee maker D.E. Master Blenders. Under this deal, Mondelez will contribute its coffee brands, including Jacobs, Gevalia and Tassimo, to a new firm called Jacobs Douwe Egberts. In return, it will get $5 billion in cash and 49% of the new company when the deal closes later this year.
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Mondelez makes cookies and biscuits (Oreo, Chips Ahoy, Ritz), chocolate bars (Cadbury, Toblerone) and gum and candy (Trident, Chiclets and Halls cough drops). It also makes coffee and other beverages, as well as grocery and cheese products for overseas markets.
The company has agreed to merge its packaged coffee business with European coffee maker D.E. Master Blenders. Under this deal, Mondelez will contribute its coffee brands, including Jacobs, Gevalia and Tassimo, to a new firm called Jacobs Douwe Egberts. In return, it will get $5 billion in cash and 49% of the new company when the deal closes later this year.
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WINDSTREAM HOLDINGS INC. $11 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 602.7 million; Market cap: $6.6 billion; Price-to-sales ratio: 1.2; Dividend yield: 9.1%; TSINetwork Rating: Average; www.windstream.com) gets 73% of its revenue from high-speed Internet and business telecommunications. It also sells regular phone services, mainly in rural parts of the U.S.
The stock jumped 20% after the company announced that it would transfer its fibre-optic and copper networks, along with some land and buildings, to a new real estate investment trust (REIT). The company will then lease these assets from the REIT.
Windstream plans to hand out units in the new REIT to its own shareholders in the first quarter of 2015.
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The stock jumped 20% after the company announced that it would transfer its fibre-optic and copper networks, along with some land and buildings, to a new real estate investment trust (REIT). The company will then lease these assets from the REIT.
Windstream plans to hand out units in the new REIT to its own shareholders in the first quarter of 2015.
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INTERNATIONAL BUSINESS MACHINES CORP. $194 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.0 billion; Market cap: $194.0 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.ibm.com) started up in 1911 making machines that processed U.S. census data, as well as other industrial equipment such as time clocks and scales.
The company now gets 55% of its revenue by designing computer systems and managing them for business and government clients. It typically does this under long-term contracts, which cuts its risk.
In the past few years, IBM has aggressively expanded its software business. It’s particularly interested in analytics software, which helps clients gather and analyze a wide variety of data. Software now supplies 27% of IBM’s revenue.
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The company now gets 55% of its revenue by designing computer systems and managing them for business and government clients. It typically does this under long-term contracts, which cuts its risk.
In the past few years, IBM has aggressively expanded its software business. It’s particularly interested in analytics software, which helps clients gather and analyze a wide variety of data. Software now supplies 27% of IBM’s revenue.
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COMPUTER MODELLING GROUP (Toronto symbol CMG; www.cmgroup.com) sells software and consulting services that help oil and gas producers use advanced recovery techniques to get more out of their wells. It has customers in over 50 countries and offices in Calgary, Houston, London, Caracas, Bogota, Kuala Lumpur and Dubai. The company is a leader in complex heavy oil and oil sands simulations. In the quarter ended March 31, 2014, Computer Modelling’s revenue rose 3.6%, to $20.0 million from $19.3 million a year earlier. Software licence sales (89% of total revenue) rose slightly, but consulting and professional services (11%) jumped 39.1%, thanks to new projects and a large consulting agreement. Earnings gained 6.7%, to $7.7 million from $7.25 million. Per-share earnings jumped 18.8%, to $0.095 from $0.08, on fewer shares outstanding....
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you advice on specific investment topics. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “Selling half of hot stocks that surge helps you guard your profits. But apply this rule only to more aggressive stocks, and not to the well-established stocks that may surprise you by going a lot higher in the long run.” As you probably know, our Successful Investor business model has two parts. We publish investment advice through The Successful Investor Inc., and we manage investor portfolios through Successful Investor Wealth Management Inc. (These two companies are affiliated by common ownership; I own both but set them up as separate companies for regulatory purposes.)...
