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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DIEBOLD INC. $39 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.3 million; Market cap: $2.5 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.9%; TSINetwork Rating: Average; www.diebold.com) is a leading maker of automated teller machines (ATMs). It also makes safes, vaults and building-security systems. The company gets 52% of its revenue from overseas.
Diebold’s revenue rose 10.1%, from $2.7 billion in 2009 to $3.0 billion in 2012. That’s mainly because of pent-up ATM demand in the wake of the 2008 financial crisis. As well, U.S. banks had to upgrade their ATMs to comply with the Americans with Disabilities Act. However, revenue in 2013 fell 4.5% to $2.9 billion, due to slowing sales of ATMs to regional U.S. banks and unfavourable currency rates.
The company earned $0.97 a share (or a total of $65 million) in 2009, but it lost $0.37 a share (or $25 million) in 2010 due to goodwill writedowns and other charges. Earnings rebounded to $2.21 a share (or $143 million) in 2011, but additional writedowns cut them to $1.20 a share (or $77 million) in 2012.
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Diebold’s revenue rose 10.1%, from $2.7 billion in 2009 to $3.0 billion in 2012. That’s mainly because of pent-up ATM demand in the wake of the 2008 financial crisis. As well, U.S. banks had to upgrade their ATMs to comply with the Americans with Disabilities Act. However, revenue in 2013 fell 4.5% to $2.9 billion, due to slowing sales of ATMs to regional U.S. banks and unfavourable currency rates.
The company earned $0.97 a share (or a total of $65 million) in 2009, but it lost $0.37 a share (or $25 million) in 2010 due to goodwill writedowns and other charges. Earnings rebounded to $2.21 a share (or $143 million) in 2011, but additional writedowns cut them to $1.20 a share (or $77 million) in 2012.
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IDEXX LABORATORIES INC. $122 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 51.6 million; Market cap: $6.3 billion; Price-to-sales ratio: 4.8; No dividends paid; TSINetwork Rating: Average; www. idexx.com) earned $3.58 a share in 2013, up 12.6% from $3.18 in 2012. Sales rose 6.5%, to $1.4 billion from $1.3 billion. These gains are mainly because veterinarians are buying more of Idexx’s equipment for detecting diseases in pets.
The company recently launched two new products that should increase this year’s sales by 7.5% to 8.5%. Its earnings should also rise to $3.85 a share. However, the stock has jumped 32% in the past year and now trades at a high 31.7 times the 2014 forecast.
Idexx is still a hold....
The company recently launched two new products that should increase this year’s sales by 7.5% to 8.5%. Its earnings should also rise to $3.85 a share. However, the stock has jumped 32% in the past year and now trades at a high 31.7 times the 2014 forecast.
Idexx is still a hold....
INTERNATIONAL BUSINESS MACHINES CORP. $193 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.0 billion; Market cap: $193.0 billion; Price-to-sales ratio: 2.2; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.ibm.com) continues to expand its cloud-computing businesses.
It recently paid an undisclosed sum for Cloudant, a private firm that creates large databases on remote servers. IBM feels Cloudant’s technology will also enhance its analytics services, which help businesses analyze large amounts of data and improve their efficiency.
The company expects its cloud revenue to reach $7 billion in 2015. That’s equal to 7% of its overall 2013 revenue of $99.8 billion.
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It recently paid an undisclosed sum for Cloudant, a private firm that creates large databases on remote servers. IBM feels Cloudant’s technology will also enhance its analytics services, which help businesses analyze large amounts of data and improve their efficiency.
The company expects its cloud revenue to reach $7 billion in 2015. That’s equal to 7% of its overall 2013 revenue of $99.8 billion.
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3M COMPANY $133 (New York symbol MMM; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 662.7 million; Market cap: $88.1 billion; Price-to-sales ratio: 3.0; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.3m.com) feels that rising pollution in China will spur demand for its face masks and water filters. As a result, the company now predicts that its Chinese revenue will rise 15% annually over the next five years. That’s much higher than 3M’s overall annual revenue growth rate of around 5%.
3M is a buy.
3M is a buy.
ALCOA INC. $12 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.1 billion; Market cap: $13.2 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.0%; TSINetwork Rating: Average; www.alcoa.com) is doubling production of aluminum truck wheels at its plant in Hungary. Demand for these wheels is strong, as they are much more resistant to rust and corrosion than steel wheels. Engineered products like these also cut Alcoa’s reliance on selling less-profitable bulk aluminum.
The company will spend $13 million to upgrade the facility. That’s equal to 4% of the $357 million, or $0.33 a share, that Alcoa earned in 2013. It expects to complete the project in early 2015.
Alcoa is a buy.
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The company will spend $13 million to upgrade the facility. That’s equal to 4% of the $357 million, or $0.33 a share, that Alcoa earned in 2013. It expects to complete the project in early 2015.
Alcoa is a buy.
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WAL-MART STORES INC. $76 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.2 billion; Market cap: $243.2 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.walmart.com) will soon let customers trade in their used video games for a credit they can use to buy other merchandise. The company will then refurbish the games and resell them in its stores.
This move should help Wal-Mart attract more customers and could spur video game console sales. As well, profit margins on used games tend to be much higher than those on new games.
Wal-Mart is a buy.
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This move should help Wal-Mart attract more customers and could spur video game console sales. As well, profit margins on used games tend to be much higher than those on new games.
Wal-Mart is a buy.
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BOEING CO. $124 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 743.4 million; Market cap: $92.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www. boeing.com) has discovered hairline cracks on the wings of 40 of its 787 Dreamliner passenger planes that are currently in production.
The problem, which does not affect planes already in service, is because the Japanese company that makes the wings changed its manufacturing process. Boeing feels it can make repairs quickly, which would let it meet its target of delivering 110 Dreamliners this year.
Boeing is a buy....
The problem, which does not affect planes already in service, is because the Japanese company that makes the wings changed its manufacturing process. Boeing feels it can make repairs quickly, which would let it meet its target of delivering 110 Dreamliners this year.
Boeing is a buy....
FAIR ISAAC CORP. $54 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 34.9 million; Market cap: $1.9 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 also makes software that helps credit card issuers control fraud and analyze cardholder spending patterns.
In its fiscal 2014 first quarter, which ended December 31, 2013, Fair Isaac’s earnings fell 17.6% to $26.2 million, or $0.73 a share. A year earlier, it earned $31.8 million, or $0.88. Revenue fell 3.0%, to $184.3 million from $190.0 million. The declines mainly resulted from a big order in the year-earlier quarter.
The company also raised its research spending by 24.3% in the latest quarter, to $18.1 million (or 9.8% of revenue) from $14.6 million (or 7.7%) a year earlier.
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In its fiscal 2014 first quarter, which ended December 31, 2013, Fair Isaac’s earnings fell 17.6% to $26.2 million, or $0.73 a share. A year earlier, it earned $31.8 million, or $0.88. Revenue fell 3.0%, to $184.3 million from $190.0 million. The declines mainly resulted from a big order in the year-earlier quarter.
The company also raised its research spending by 24.3% in the latest quarter, to $18.1 million (or 9.8% of revenue) from $14.6 million (or 7.7%) a year earlier.
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BROADRIDGE FINANCIAL SERVICES INC. $37 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 119.4 million; Market cap: $4.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.3%; TSINetwork Rating: Average; www.broadridge.com) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 85% of all proxy votes in the U.S.
In its fiscal 2014 second quarter, which ended December 31, 2013, Broadridge earned $31.2 million, up 43.1% from $21.8 million a year earlier. Earnings per share rose 47.1%, to $0.25 from $0.17, on fewer shares outstanding.
Revenue gained 5.6%, to $520.6 million from $493.2 million. Revenue from contracts that pay Broadridge recurring fees (two-thirds of the total) rose 9% and accounted for almost all of the overall gain. The remaining third comes from one-time events, such as special shareholder meetings and distributing information when a mutual fund changes managers.
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In its fiscal 2014 second quarter, which ended December 31, 2013, Broadridge earned $31.2 million, up 43.1% from $21.8 million a year earlier. Earnings per share rose 47.1%, to $0.25 from $0.17, on fewer shares outstanding.
Revenue gained 5.6%, to $520.6 million from $493.2 million. Revenue from contracts that pay Broadridge recurring fees (two-thirds of the total) rose 9% and accounted for almost all of the overall gain. The remaining third comes from one-time events, such as special shareholder meetings and distributing information when a mutual fund changes managers.
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