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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ZARGON OIL & GAS $8.61 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 30.1 million; Market cap: $259.1 million; Dividend yield: 8.4%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. Its production is 64% oil and 36% gas.
In the quarter ended December 31, 2013, Zargon produced 7,276 barrels of oil equivalent a day, down 5.8% from 7,634 a year earlier. That’s because it sold some less-important properties and cut back on natural gas drilling in response to lower gas prices.
That lower output more than offset slightly higher oil and gas prices in the latest quarter, dropping the company’s cash flow per share by 27.3%, to $0.40 from $0.55. Zargon expects cash flow of $1.66 a share in 2014. The stock trades at 5.2 times that estimate.
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In the quarter ended December 31, 2013, Zargon produced 7,276 barrels of oil equivalent a day, down 5.8% from 7,634 a year earlier. That’s because it sold some less-important properties and cut back on natural gas drilling in response to lower gas prices.
That lower output more than offset slightly higher oil and gas prices in the latest quarter, dropping the company’s cash flow per share by 27.3%, to $0.40 from $0.55. Zargon expects cash flow of $1.66 a share in 2014. The stock trades at 5.2 times that estimate.
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BIRCHCLIFF ENERGY $10.35 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 144.0 million; Market cap: $1.5 billion; No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 81% of its output is gas. The remaining 19% is oil.
In the three months ended December 31, 2013, Birchcliff’s production rose 6.5%, to 28,391 barrels of oil equivalent per day (including gas) from 26,655 barrels a year earlier. Cash flow per share gained 25.0%, to $0.35 from $0.28, on the increased production and higher gas prices.
In 2012, Birchcliff completed Phase III of its gas plant expansion in Pouce Coupe, Alberta. This project doubled the facility’s capacity and is letting the company bring the additional gas it is producing to market.
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In the three months ended December 31, 2013, Birchcliff’s production rose 6.5%, to 28,391 barrels of oil equivalent per day (including gas) from 26,655 barrels a year earlier. Cash flow per share gained 25.0%, to $0.35 from $0.28, on the increased production and higher gas prices.
In 2012, Birchcliff completed Phase III of its gas plant expansion in Pouce Coupe, Alberta. This project doubled the facility’s capacity and is letting the company bring the additional gas it is producing to market.
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DUNDEE REIT $28.39 (Toronto symbol D.UN; TSINetwork Rating: Extra Risk) (416- 365-3535; www.dundeereit.com; Units outstanding: 103.4 million; Market cap: $3.0 billion; Dividend yield: 7.9%) owns and manages 24.6 million square feet of office and retail space.
In the quarter ended December 31, 2013, Dundee REIT’s revenue rose 8.6%, to $208.4 million from $192.0 million a year earlier. The trust bought $592.5 million worth of new buildings comprising 1.7 million feet of leasable area. That was the reason for most of the revenue increase.
Cash flow gained 15.4%, to $67.0 million from $58.1 million. However, Dundee issued new units to pay for the acquired properties, so its cash flow per unit rose 8.8%, to $0.62 from $0.57, on more units outstanding.
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In the quarter ended December 31, 2013, Dundee REIT’s revenue rose 8.6%, to $208.4 million from $192.0 million a year earlier. The trust bought $592.5 million worth of new buildings comprising 1.7 million feet of leasable area. That was the reason for most of the revenue increase.
Cash flow gained 15.4%, to $67.0 million from $58.1 million. However, Dundee issued new units to pay for the acquired properties, so its cash flow per unit rose 8.8%, to $0.62 from $0.57, on more units outstanding.
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THE CHURCHILL CORP. $10.47 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.9 million; Market cap: $260.5 million; Dividend yield: 4.6%) provides building-construction, commercial and industrial electrical contracting, earthmoving and industrial insulation services to government and private sector clients, mainly in Western Canada.
In the three months ended December 31, 2013, Churchill earned $3.3 million, or $0.13 a share. That’s a big improvement from a loss of $62.8 million, or $2.56 a share, a year earlier. The year-ago results include a one-time writedown of $64.6 million.
Revenue increased 2.5%, to $297.0 million from $289.9 million. Churchill has worked through most of the less-profitable contracts it took on as part of its acquisitions, or that it negotiated when its markets were more competitive in 2009 and 2010.
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In the three months ended December 31, 2013, Churchill earned $3.3 million, or $0.13 a share. That’s a big improvement from a loss of $62.8 million, or $2.56 a share, a year earlier. The year-ago results include a one-time writedown of $64.6 million.
Revenue increased 2.5%, to $297.0 million from $289.9 million. Churchill has worked through most of the less-profitable contracts it took on as part of its acquisitions, or that it negotiated when its markets were more competitive in 2009 and 2010.
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RUSSEL METALS $30.34 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 61.0 million; Market cap: $1.9 billion; Dividend yield: 4.4%) is one of North America’s largest metal distributors. It serves 39,000 clients at 53 locations in Canada and 12 in the U.S.
In the quarter ended December 31, 2013, Russel’s revenue rose 5.9%, to $811.1 million from $765.9 million a year earlier. Sales at the company’s metalservices business rose 4%, as higher demand offset lower selling prices. The energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 12%.
Earnings gained 13.4%, to $22.8 million from $20.1 million. Per-share earnings rose 8.8%, to $0.37 from $0.34, on more shares outstanding.
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In the quarter ended December 31, 2013, Russel’s revenue rose 5.9%, to $811.1 million from $765.9 million a year earlier. Sales at the company’s metalservices business rose 4%, as higher demand offset lower selling prices. The energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 12%.
Earnings gained 13.4%, to $22.8 million from $20.1 million. Per-share earnings rose 8.8%, to $0.37 from $0.34, on more shares outstanding.
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SHERRITT INTERNATIONAL $3.64 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $1.1 billion; Yield: 1.1%) has cut its dividend to $0.01 a share from $0.043. It now yields 1.1%.
In the quarter ended December 31, 2013, Sherritt’s revenue fell 16.7%, to $108.6 million from $130.3 million a year earlier. It lost $0.13 a share, compared to a loss of $0.01.
Sherritt’s long-term debt is $2.1 billion, or a high 2.3 times its market cap. But after the upcoming sale of its coal business, it will hold cash of $1.5 billion, or $5.05 a share.
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In the quarter ended December 31, 2013, Sherritt’s revenue fell 16.7%, to $108.6 million from $130.3 million a year earlier. It lost $0.13 a share, compared to a loss of $0.01.
Sherritt’s long-term debt is $2.1 billion, or a high 2.3 times its market cap. But after the upcoming sale of its coal business, it will hold cash of $1.5 billion, or $5.05 a share.
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YAMANA GOLD $10.77 (Toronto symbol YRI; TSINetwork Rating: Speculative) (416-815-0220; www.- yamana.com; Shares outstanding: 753.3 million; Market cap: $8.1 billion; Dividend yield: 1.5%) owns eight operating gold mines in Mexico, Brazil, Chile and Argentina. It also holds a 12.5% stake in the Alumbrera copper/gold mine in Argentina and has a number of other properties in advanced stages of development.
In the three months ended December 31, 2013, Yamana’s revenue fell 33.2%, to $420.7 million from $629.5 million a year earlier (all figures except share price and market cap in U.S. dollars).
Gold production declined 6.0%, to 303,768 ounces from 322,990. Prices for gold, copper and silver also fell. (Copper and silver are significant by-products of the company’s gold mining.) Yamana’s cash flow per share declined 45.0%, to $0.22 from $0.40.
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In the three months ended December 31, 2013, Yamana’s revenue fell 33.2%, to $420.7 million from $629.5 million a year earlier (all figures except share price and market cap in U.S. dollars).
Gold production declined 6.0%, to 303,768 ounces from 322,990. Prices for gold, copper and silver also fell. (Copper and silver are significant by-products of the company’s gold mining.) Yamana’s cash flow per share declined 45.0%, to $0.22 from $0.40.
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NEW GOLD $6.24 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold- .com; Shares outstanding: 503.3 million; Market cap: $3.1 billion; No dividends paid) has four mines: the Mesquite project in the U.S., Cerro San Pedro in Mexico, the Peak mine in Australia and the New Afton mine in B.C.
New Gold also owns 30% of the El Morro copper/ gold project in Chile, 100% of the Blackwater property in B.C. and 100% of Ontario’s Rainy River project.
In the three months ended December 31, 2013, New Gold’s cash flow per share fell 17.4%, to $0.19 from $0.23 a year earlier. Prices of gold, copper and silver fell, as did production from Cerro San Pedro, which is scheduled to close next year.
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New Gold also owns 30% of the El Morro copper/ gold project in Chile, 100% of the Blackwater property in B.C. and 100% of Ontario’s Rainy River project.
In the three months ended December 31, 2013, New Gold’s cash flow per share fell 17.4%, to $0.19 from $0.23 a year earlier. Prices of gold, copper and silver fell, as did production from Cerro San Pedro, which is scheduled to close next year.
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LEON’S FURNITURE $15.75 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243- 7880; www.leons.ca; Shares outstanding: 70.6 million; Market cap: $1.1 billion; Div. yield: 2.5%) has steadily opened new stores, growing from 27 stores in 2003, to 75 today.
But the company more than quadrupled in size overnight with the March 28, 2013 purchase of its main rival, The Brick, for $700 million. The Brick operates 234 outlets across Canada. Leon’s and The Brick will continue to operate as separate chains.
As a result of the acquisition, Leon’s sales jumped to $523.0 million in the three months ended December 31, 2013, from $188.5 million a year earlier. Earnings rose 61.5%, to $26.0 million, or $0.37 a share, from $16.1 million, or $0.23.
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But the company more than quadrupled in size overnight with the March 28, 2013 purchase of its main rival, The Brick, for $700 million. The Brick operates 234 outlets across Canada. Leon’s and The Brick will continue to operate as separate chains.
As a result of the acquisition, Leon’s sales jumped to $523.0 million in the three months ended December 31, 2013, from $188.5 million a year earlier. Earnings rose 61.5%, to $26.0 million, or $0.37 a share, from $16.1 million, or $0.23.
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ALIMENTATION COUCHE-TARD $91.36 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard. com; Shares outstanding: 179.4 million; Market cap: $17.3 billion; Dividend yield: 0.4%) grew from just 630 stores in Quebec in 1998 to 1,612 in 1999, mostly through the purchase of Silcorp Ltd. and its 980 Mac’s and Becker’s stores in Ontario and western Canada. Couche-Tard then continued to expand through profitable acquisitions, including buying 2,290 stores in the U.S. in 2003 from ConocoPhillips.
The company made another big acquisition in June 2012 with the $2.7-billion purchase of Norway’s Statoil Fuel & Retail chain of gas stations (all figures except share price in U.S. dollars).
In Europe, Couche-Tard now operates 2,263 outlets across Scandinavia (Norway, Sweden and Denmark), Poland, the Baltic states (Estonia, Latvia and Lithuania) and Russia. That’s in addition to its 6,221 stores throughout North America operating under the Couche- Tard and Circle K banners.
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The company made another big acquisition in June 2012 with the $2.7-billion purchase of Norway’s Statoil Fuel & Retail chain of gas stations (all figures except share price in U.S. dollars).
In Europe, Couche-Tard now operates 2,263 outlets across Scandinavia (Norway, Sweden and Denmark), Poland, the Baltic states (Estonia, Latvia and Lithuania) and Russia. That’s in addition to its 6,221 stores throughout North America operating under the Couche- Tard and Circle K banners.
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