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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CONAGRA FOODS INC. $31 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 422.5 million; Market cap: $13.1 billion; Price-to-sales ratio: 0.7; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.conagrafoods.com) has paid $93 million for Chinese potato producer TaiMei Potato Industry Ltd.
This is ConAgra’s first potato-processing facility in China. The purchase will help the company increase sales of its Lamb Weston frozen potato products in China and other parts of Asia.
ConAgra is a buy.
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This is ConAgra’s first potato-processing facility in China. The purchase will help the company increase sales of its Lamb Weston frozen potato products in China and other parts of Asia.
ConAgra is a buy.
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EBAY INC. $53 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $63.6 billion; Price-to-sales ratio: 4.0; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) has signed a deal with Russia Post that will speed up delivery of foreign goods Russian buyers purchase on eBay’s websites.
As well, eBay will soon launch a website in Russia that will let domestic merchants sell more of their goods online.
Expanding in Russia adds risk, particularly as the U.S. and Europe plan to impose new economic sanctions against the country in response to its annexation of Crimea. However, Russia only accounts for a small fraction of eBay’s revenue and earnings.
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As well, eBay will soon launch a website in Russia that will let domestic merchants sell more of their goods online.
Expanding in Russia adds risk, particularly as the U.S. and Europe plan to impose new economic sanctions against the country in response to its annexation of Crimea. However, Russia only accounts for a small fraction of eBay’s revenue and earnings.
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STATE STREET CORP. $72 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 425.0 million; Market cap: $30.6 billion; Price-to-sales ratio: 3.2; Dividend yield: 1.7%; TSINetwork Rating: Average; www. statestreet.com) sells accounting and administrative services to large institutional investors, such as mutual funds and pension plans.
The company’s fee income rises and falls with the value of the securities it manages. Thanks to improving stock markets and new contracts, earnings rose 5.6% in the quarter ended June 30, 2014, to $603 million from $571 million a year earlier.
State Street spent $410 million on share buybacks in the latest quarter. As a result, earnings per share gained 12.1%, to $1.39 from $1.24. Revenue rose 3.7%, to $2.7 billion from $2.6 billion.
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The company’s fee income rises and falls with the value of the securities it manages. Thanks to improving stock markets and new contracts, earnings rose 5.6% in the quarter ended June 30, 2014, to $603 million from $571 million a year earlier.
State Street spent $410 million on share buybacks in the latest quarter. As a result, earnings per share gained 12.1%, to $1.39 from $1.24. Revenue rose 3.7%, to $2.7 billion from $2.6 billion.
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MOTOROLA SOLUTIONS INC. $65 (New York symbol MSI; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 255.3 million; Market cap: $16.6 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.9%; TSINetwork Rating: Average; www.motorolasolutions.com) took its current form on January 4, 2011, when the old Motorola Inc. spun off its struggling cellphone business, Motorola Mobility, as a separate firm. The remaining operations became Motorola Solutions after the breakup.
The company makes specialized communications equipment, such as radios for police and fire vehicles. Government clients account for about 70% of its revenue.
Motorola Solutions recently agreed to sell its enterprise division, which provides the remaining 30% of its revenue. This business makes bar-code scanners and interactive kiosks for corporate clients.
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The company makes specialized communications equipment, such as radios for police and fire vehicles. Government clients account for about 70% of its revenue.
Motorola Solutions recently agreed to sell its enterprise division, which provides the remaining 30% of its revenue. This business makes bar-code scanners and interactive kiosks for corporate clients.
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CINTAS CORP. $63 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 117.0 million; Market cap: $7.4 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.2%; TSINetwork Rating: Average; www.cintas.com) earned $374.4 million in its 2014 fiscal year, which ended May 31, 2014, up 18.7% from $315.4 million in 2013. Per-share earnings rose 21.0%, to $3.05 from $2.52, on fewer shares outstanding. If you exclude a gain on the sale of Cintas’s document-shredding business, it would have earned $2.79 a share in fiscal 2014.
Revenue rose 5.5%, to $4.6 billion from $4.3 billion, as the improving economy spurred demand for Cintas’s uniform-rental and office-cleaning services.
The company will probably earn $3.06 to $3.15 a share in fiscal 2015. The stock trades at a high, but still reasonable, 20.3 times the midpoint of that range.
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Revenue rose 5.5%, to $4.6 billion from $4.3 billion, as the improving economy spurred demand for Cintas’s uniform-rental and office-cleaning services.
The company will probably earn $3.06 to $3.15 a share in fiscal 2015. The stock trades at a high, but still reasonable, 20.3 times the midpoint of that range.
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NEWELL RUBBERMAID INC. $32 (New York symbol NWL; Aggressive Growth and Income Portfolios, Consumer sector; Shares outstanding: 276.7 million; Market cap: $8.9 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.1%; TSINetwork Rating: Average; www.newellrubbermaid.com) is buying Ignite Holdings, a private company that makes reusable water bottles and thermal mugs under the Contigo and Avex brands.
Newell will pay $308 million when it completes the purchase later this year. That’s equal to 57.6% of the $534.9 million, or $1.83 a share, that Newell earned in 2013. The new operations will add $125 million to its annual sales of $5.7 billion.
The company feels its expertise will cut Ignite’s manufacturing costs. Newell can also use its extensive global distribution networks to increase Ignite’s sales.
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Newell will pay $308 million when it completes the purchase later this year. That’s equal to 57.6% of the $534.9 million, or $1.83 a share, that Newell earned in 2013. The new operations will add $125 million to its annual sales of $5.7 billion.
The company feels its expertise will cut Ignite’s manufacturing costs. Newell can also use its extensive global distribution networks to increase Ignite’s sales.
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PEPSICO INC. $89 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.5 billion; Market cap: $133.5 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pepsico.com) continues to face pressure from activist investor Nelson Peltz to spin off or sell its beverage business, which has suffered as health-conscious consumers cut their soft drink consumption. Peltz owns about 1% of the company’s shares.
The beverage operations supply 48% of PepsiCo’s sales. The remaining 52% comes from its snack food operations, which include Frito-Lay potato chips and Quaker Oats cereals.
The company has rejected the proposal because it feels making both soft drinks and snacks gives it manufacturing, distribution and marketing advantages. Instead, it aims to boost its profits with a new five-year plan that includes automating more of its bottling plants and closing less-efficient facilities. PepsiCo will use the resulting savings to buy back $5 billion worth of its shares in 2014.
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The beverage operations supply 48% of PepsiCo’s sales. The remaining 52% comes from its snack food operations, which include Frito-Lay potato chips and Quaker Oats cereals.
The company has rejected the proposal because it feels making both soft drinks and snacks gives it manufacturing, distribution and marketing advantages. Instead, it aims to boost its profits with a new five-year plan that includes automating more of its bottling plants and closing less-efficient facilities. PepsiCo will use the resulting savings to buy back $5 billion worth of its shares in 2014.
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BROADRIDGE FINANCIAL SERVICES INC. $41 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 120.7 million; Market cap: $4.9 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.0%; TSINetwork Rating: Average; www.broadridge.com) began trading on April 2, 2007, after former parent Automatic Data Processing handed out Broadridge stock to its own investors as a special dividend.
The company serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. It processes 85% of all proxy votes in the U.S.
Broadridge earned $55.1 million in its fiscal 2014 third quarter, which ended March 31, 2014. That’s up 11.3% from $49.5 million a year earlier. Earnings per share rose 12.8%, to $0.44 from $0.39.
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The company serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. It processes 85% of all proxy votes in the U.S.
Broadridge earned $55.1 million in its fiscal 2014 third quarter, which ended March 31, 2014. That’s up 11.3% from $49.5 million a year earlier. Earnings per share rose 12.8%, to $0.44 from $0.39.
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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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