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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STANTEC INC. $69.35 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 46.7 million; Market cap: $3.2 billion; Dividend yield: 1.1%) sells a range of consulting, project-delivery, design and technology services. Its clients operate in a variety of industries, including oil and gas, transportation and construction.
In the quarter ended March 31, 2014, Stantec’s revenue rose 12.7%, to $481.3 million from $426.9 million a year earlier. Acquisitions were one reason for the gain. Stantec is also working on many new projects, including major pipelines and the huge Westside Subway Transit Corridor in southern California.
Earnings gained 17.9%, to $33.5 million, or $0.72 a share, from $28.4 million, or $0.62.
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In the quarter ended March 31, 2014, Stantec’s revenue rose 12.7%, to $481.3 million from $426.9 million a year earlier. Acquisitions were one reason for the gain. Stantec is also working on many new projects, including major pipelines and the huge Westside Subway Transit Corridor in southern California.
Earnings gained 17.9%, to $33.5 million, or $0.72 a share, from $28.4 million, or $0.62.
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DOREL INDUSTRIES $37.90 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 32.3 million; Market cap: $1.3 billion; Dividend yield: 3.3%) makes a range of items, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational goods, mainly bicycles.
In the three months ended March 31, 2014, Dorel’s sales rose 9.0%, to $647.7 million from $594.2 million a year earlier (all figures except share price and market cap in U.S. dollars). Sales rose 18.1% at the recreational segment and 2.0% at the home-furnishing division. Juvenile products sales gained 5.5%.
Earnings per share rose 11.4%, to $0.78 from $0.70. Sales of its high-profit Cannondale and Pacific Cycle premium bikes rebounded with an early spring in Europe. As well, Dorel’s 70% stake in Caloi, which it acquired last year, is now adding to its profits.
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In the three months ended March 31, 2014, Dorel’s sales rose 9.0%, to $647.7 million from $594.2 million a year earlier (all figures except share price and market cap in U.S. dollars). Sales rose 18.1% at the recreational segment and 2.0% at the home-furnishing division. Juvenile products sales gained 5.5%.
Earnings per share rose 11.4%, to $0.78 from $0.70. Sales of its high-profit Cannondale and Pacific Cycle premium bikes rebounded with an early spring in Europe. As well, Dorel’s 70% stake in Caloi, which it acquired last year, is now adding to its profits.
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MART RESOURCES $1.38 (Toronto symbol MMT; TSINetwork Rating: Speculative) (403-270-1841; www.martresources.com; Shares outstanding: 356.6 million; Market cap: $488.5 million; Dividend yield: 4.4%) has cut its quarterly dividend to $0.015 from $0.05. The stock now yields 4.4%, based on the current rate.
The company began paying dividends (at the $0.05-a-share rate) in September 2012. At the time, it said it would keep evaluating its payout in relation to its cash flow, liquidity, capital expenditures and other factors.
Mart now says it is reducing the dividend, at least for the time being, to conserve cash. Its decision is based on the ongoing drilling program at its Umusadege field in Nigeria and uncertainty about the first oil shipments through its new Umugini pipeline.
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HECLA MINING COMPANY $3.22 (New York symbol HL; TSINetwork Rating: Extra Risk) (208-769- 4100; www.hecla-mining.com; Shares outstanding: 343.1 million; Market cap: $1.1 billion) explores for, mines and processes silver and gold in the U.S. and Mexico. Most of its silver output comes from its Greens Creek mine in Alaska and its Lucky Friday project in Idaho. The company’s Casa Berardi mine in Quebec, which it bought for $796 million in June 2013, supplies its gold production.
In the three months ended March 31, 2014, Hecla produced 2.5 million ounces of silver, up 31.1% from 1.9 million ounces a year earlier. Gold output jumped to 46,268 ounces from 13,689, mostly due to Casa Berardi. Cash flow per share climbed to $0.07 from $0.04.
The company expects its two silver mines to produce 9.5 million to 10 million ounces in 2014, while Greens Creek will add 55,000 ounces of gold. Casa Berardi is on target to produce 125,000 ounces of gold this year.
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In the three months ended March 31, 2014, Hecla produced 2.5 million ounces of silver, up 31.1% from 1.9 million ounces a year earlier. Gold output jumped to 46,268 ounces from 13,689, mostly due to Casa Berardi. Cash flow per share climbed to $0.07 from $0.04.
The company expects its two silver mines to produce 9.5 million to 10 million ounces in 2014, while Greens Creek will add 55,000 ounces of gold. Casa Berardi is on target to produce 125,000 ounces of gold this year.
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SHERRITT INTERNATIONAL $4.45 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $1.3 billion; Dividend yield: 0.9%) recently sold off all of its coal interests for $793 million in cash.
The company is now focused on nickel production, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy nickel mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan, and manages 506 megawatts of power generation capacity in Cuba.
In the three months ended March 31, 2014, Sherritt’s revenue rose 13.0%, to $120.9 million from $107.0 million a year earlier. Cash flow per share was unchanged at $0.10.
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The company is now focused on nickel production, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy nickel mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan, and manages 506 megawatts of power generation capacity in Cuba.
In the three months ended March 31, 2014, Sherritt’s revenue rose 13.0%, to $120.9 million from $107.0 million a year earlier. Cash flow per share was unchanged at $0.10.
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ALIMENTATION COUCHETARD $29.50 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard.com; Shares outstanding: 565.8 million; Market cap: $16.6 billion; Dividend yield: 0.5%) plans to keep looking for big acquisitions like its $2.7-billion purchase of Norway’s Statoil Fuel & Retail gas station chain in June 2012.
However, the company has a long history of not overpaying for acquisitions; in 2010, it dropped its $2-billion U.S. hostile takeover offer for Casey’s General Stores after competitor 7-Eleven outbid it. And earlier this year, it stayed out of the running to buy oil and gas giant Hess Corp.’s 1,354 U.S. gas stations and convenience stores. Marathon Petroleum eventually paid $2.9 billion.
Meanwhile, Couche-Tard’s sales rose 2.0% in the quarter ended April 27, 2014, to $9.0 billion from $8.8 billion a year ago. Earnings per share rose 10.0%, to $0.22 from $0.20. (All figures except share price and market cap in U.S. dollars. Per-share amounts adjusted for a 3-for-1 stock split on April 14, 2014).
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However, the company has a long history of not overpaying for acquisitions; in 2010, it dropped its $2-billion U.S. hostile takeover offer for Casey’s General Stores after competitor 7-Eleven outbid it. And earlier this year, it stayed out of the running to buy oil and gas giant Hess Corp.’s 1,354 U.S. gas stations and convenience stores. Marathon Petroleum eventually paid $2.9 billion.
Meanwhile, Couche-Tard’s sales rose 2.0% in the quarter ended April 27, 2014, to $9.0 billion from $8.8 billion a year ago. Earnings per share rose 10.0%, to $0.22 from $0.20. (All figures except share price and market cap in U.S. dollars. Per-share amounts adjusted for a 3-for-1 stock split on April 14, 2014).
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TIM HORTONS $60.17 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 134.3 million; Market cap: $8.1 billion; Dividend yield: 2.1%) operates 3,610 coffee-anddonut shops in Canada, 870 in the U.S. and 44 in the Persian Gulf.
In the quarter ended March 30, 2014, sales rose 4.8%, to $766.4 million from $731.5 million a year ago. The gain was mainly because the company opened 23 outlets in Canada and 11 in the U.S. Samestore sales rose 1.6% at its Canadian locations and 1.9% in the U.S.
Earnings rose 5.5%, to $90.9 million from $86.2 million. In the past nine months, the company has repurchased $1 billion worth of shares. As a result, its earnings per share jumped 17.9%, to $0.66 from $0.56.
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In the quarter ended March 30, 2014, sales rose 4.8%, to $766.4 million from $731.5 million a year ago. The gain was mainly because the company opened 23 outlets in Canada and 11 in the U.S. Samestore sales rose 1.6% at its Canadian locations and 1.9% in the U.S.
Earnings rose 5.5%, to $90.9 million from $86.2 million. In the past nine months, the company has repurchased $1 billion worth of shares. As a result, its earnings per share jumped 17.9%, to $0.66 from $0.56.
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YUM! BRANDS INC. $82 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 411.4 million; Market cap: $33.7 billion; Price-to-sales ratio: 2.8; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.yum.com) has 40,324 fast-food restaurants in over 110 countries. Its main banners include KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food). Franchisees operate 80% of these outlets.
The company was the first fast-food chain to enter China, in 1987, and is now a leader in that country. Its 6,332 Chinese outlets now supply 53% of its sales and 35% of its earnings. Other markets include the U.S. (23% of sales, 31% of earnings), and other countries (24%, 34%).
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The company was the first fast-food chain to enter China, in 1987, and is now a leader in that country. Its 6,332 Chinese outlets now supply 53% of its sales and 35% of its earnings. Other markets include the U.S. (23% of sales, 31% of earnings), and other countries (24%, 34%).
Food safety fears hurt results
UNITED TECHNOLOGIES CORP. $116 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 916.7 million; Market cap: $106.3 billion; Price-to-sales ratio: 1.7; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.utc.com) has amended its deal to build 28 Sikorsky Cyclone helicopters for the Canadian government. The company had planned to deliver these helicopters in 2012, but disputes over prices and support prompted it to suspend the program. It now plans to begin deliveries in 2015.
The original contract was worth $4.6 billion. But due to the delays in starting up production, United Technologies will record a one-time charge of $440 million in the second quarter of 2014. However, it feels other unusual gains will offset this charge.
As a result, the company still expects to earn $6.65 to $6.85 a share for all of 2014. The stock trades at 17.2 times the midpoint of that range. That’s a reasonable p/e ratio in light of its leading market share in its various niche industries (jet engines, elevators and heating and air conditioning equipment) and wide global reach (overseas markets account for 60% of its revenue).
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The original contract was worth $4.6 billion. But due to the delays in starting up production, United Technologies will record a one-time charge of $440 million in the second quarter of 2014. However, it feels other unusual gains will offset this charge.
As a result, the company still expects to earn $6.65 to $6.85 a share for all of 2014. The stock trades at 17.2 times the midpoint of that range. That’s a reasonable p/e ratio in light of its leading market share in its various niche industries (jet engines, elevators and heating and air conditioning equipment) and wide global reach (overseas markets account for 60% of its revenue).
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GENUINE PARTS CO. $87 (New York symbol GPC; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 153.6 million; Marketcap: $13.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.6%; TSINetwork Rating: Average; www.genpt.com) has agreed to pay an undisclosed sum for Toledo, Ohio-based Impact Products. This privately held firm sells janitorial equipment, such as mops, pails, safety glasses and first aid kits, to businesses.
Expanding by acquisition adds risk, but the purchase looks like a good fit with Genuine’s office supplies and furniture business. The new operations will also add $85 million to Genuine’s $14.1 billion of annual sales. Moreover, small purchases like this tend to be easier to integrate.
The stock now trades at 19.0 times the company’s projected 2014 earnings of $4.58 a share. That’s a high p/e for a firm that supplies clients in cyclical industries like auto parts and manufacturing.
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Expanding by acquisition adds risk, but the purchase looks like a good fit with Genuine’s office supplies and furniture business. The new operations will also add $85 million to Genuine’s $14.1 billion of annual sales. Moreover, small purchases like this tend to be easier to integrate.
The stock now trades at 19.0 times the company’s projected 2014 earnings of $4.58 a share. That’s a high p/e for a firm that supplies clients in cyclical industries like auto parts and manufacturing.
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