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.
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GANNETT CO. INC. $27 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 227.9 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.0%; TSINetwork Rating: Average; www.gannett.com) plans to include USAToday, its flagship newspaper, in 35 of its local daily papers’ print and electronic editions. This is a low-cost way to expose more readers to USAToday- and attract more advertisers.
As well, the company expects its TV stations’ advertising revenue to fall 20% in the fourth quarter of 2013, as the year-earlier quarter benefited from heavy political advertising ahead of the presidential election. However, if you disregard political ads, Gannett’s broadcast revenue should rise 17%.
Gannett is a buy.
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As well, the company expects its TV stations’ advertising revenue to fall 20% in the fourth quarter of 2013, as the year-earlier quarter benefited from heavy political advertising ahead of the presidential election. However, if you disregard political ads, Gannett’s broadcast revenue should rise 17%.
Gannett is a buy.
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WINDSTREAM HOLDINGS INC. $8.19 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 596.1 million; Market cap: $4.9 billion; Price-to-sales ratio: 0.8; Dividend yield: 12.2%; TSINetwork Rating: Average; www.windstream.com) gets 70% of its revenue from two fast-growing fields: high-speed Internet and business telecommunications.
The company also has 3.3 million regular phone users, mainly in rural parts of the U.S., and demand for this service is falling. In the three months ended September 30, 2013, Windstream’s revenue declined 2.7%, to $1.50 billion from $1.55 billion a year earlier. Earnings per share fell 37.5%, to $0.05 from $0.08. If you exclude costs to integrate an acquisition and a loss on the early retirement of debt, earnings were flat.
Windstream is a hold....
The company also has 3.3 million regular phone users, mainly in rural parts of the U.S., and demand for this service is falling. In the three months ended September 30, 2013, Windstream’s revenue declined 2.7%, to $1.50 billion from $1.55 billion a year earlier. Earnings per share fell 37.5%, to $0.05 from $0.08. If you exclude costs to integrate an acquisition and a loss on the early retirement of debt, earnings were flat.
Windstream is a hold....
VERIZON COMMUNICATIONS INC. $48 (New York symbol VZ, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $139.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 4.4%; TSINetwork Rating: Average; www. verizon.com) is buying the 45% of Verizon Wireless that it doesn’t already own from U.K.-based Vodafone Group (Nasdaq symbol VOD). Verizon Wireless is a joint venture that sells wireless services to 101.2 million U.S. subscribers.
Verizon will pay $130 billion for Vodafone’s stake, including $58.9 billion in cash. It will also issue $60.2 billion of new common shares to Vodafone shareholders, which will give them 30% of the combined firm. Notes and other compensation will cover the remaining $11.0 billion. Verizon expects to close the deal in the first quarter of 2014.
Meanwhile, strong demand for wireless and highspeed Internet increased the company’s earnings by 20.3% in the third quarter of 2013, to $0.77 a share from $0.64 a year earlier. Revenue rose 4.4%, to $30.3 billion from $29.0 billion.
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Verizon will pay $130 billion for Vodafone’s stake, including $58.9 billion in cash. It will also issue $60.2 billion of new common shares to Vodafone shareholders, which will give them 30% of the combined firm. Notes and other compensation will cover the remaining $11.0 billion. Verizon expects to close the deal in the first quarter of 2014.
Meanwhile, strong demand for wireless and highspeed Internet increased the company’s earnings by 20.3% in the third quarter of 2013, to $0.77 a share from $0.64 a year earlier. Revenue rose 4.4%, to $30.3 billion from $29.0 billion.
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AT&T INC. $34 (New York symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 5.3 billion; Market cap: $180.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.3%; TSINetwork Rating: Average; www.att.com) is the largest wireless service provider in the U.S., with 109.5 million subscribers.
AT&T continues to profit as its customers upgrade to smartphones, which generate higher revenue than cellphones. About 75% of AT&T’s users on long-term contracts now use smartphones, and it feels this could rise to 90% in the next few years.
The company is also profiting from rising demand for its U-verse package, which uses high-speed fibre optic technology to deliver phone, Internet and TV services. It now has over 10 million U-verse subscribers, up 3.1% from 9.7 million on September 30, 2013.
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AT&T continues to profit as its customers upgrade to smartphones, which generate higher revenue than cellphones. About 75% of AT&T’s users on long-term contracts now use smartphones, and it feels this could rise to 90% in the next few years.
The company is also profiting from rising demand for its U-verse package, which uses high-speed fibre optic technology to deliver phone, Internet and TV services. It now has over 10 million U-verse subscribers, up 3.1% from 9.7 million on September 30, 2013.
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ARCHER DANIELS MIDLAND CO. $43 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 659.0 million; Market cap: $28.3 billion; Priceto- sales ratio: 0.3; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.adm.com) has been forced to drop its offer to buy the 80.2% of GrainCorp, a leading Australian grain-storage and shipping company, that it does not already own.
That’s because Australian foreign investment regulators have blocked a full takeover. However, they could let Archer Daniels increase its GrainCorp stake to 24.9%. That would still let it profit as Australia ships more crops to Asia.
Meanwhile, the company is using the $3.0 billion it would have spent on this purchase to raise its quarterly dividend by 26.3%, to $0.24 a share from $0.19. The new annual rate of $0.96 yields 2.2%. It also plans to buy back 3% of its shares in 2014.
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That’s because Australian foreign investment regulators have blocked a full takeover. However, they could let Archer Daniels increase its GrainCorp stake to 24.9%. That would still let it profit as Australia ships more crops to Asia.
Meanwhile, the company is using the $3.0 billion it would have spent on this purchase to raise its quarterly dividend by 26.3%, to $0.24 a share from $0.19. The new annual rate of $0.96 yields 2.2%. It also plans to buy back 3% of its shares in 2014.
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CENOVUS ENERGY INC. $28 (New York symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 755.8 million; Market cap: $21.2 billion; Priceto- sales ratio: 1.2; Dividend yield: 3.2%; TSINetwork Rating: Average; www.cenovus.com) gets 60% of its production from its three heavy oil projects in Alberta and one in Saskatchewan. Conventional oil and natural gas wells supply the remaining 40%.
U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects in Alberta. Cenovus ships the bitumen from these fields to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these refineries.
The company expects lower cash flow in 2014, partly due to rising operating costs at its oil sands projects. It’s now working on making these operations more efficient.
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U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects in Alberta. Cenovus ships the bitumen from these fields to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these refineries.
The company expects lower cash flow in 2014, partly due to rising operating costs at its oil sands projects. It’s now working on making these operations more efficient.
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APACHE CORP. $86 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 399.2 million; Market cap: $34.3 billion; Price-to-sales ratio: 2.0; Dividend yield: 0.9%; TSINetwork Rating: Average; www. apachecorp.com) continues to sell some its less important oil and gas properties, including its offshore fields in the Gulf of Mexico and a third of its Egyptian operations. In all, the company expects to raise $4 billion from these sales in 2013.
Apache will use half of the proceeds to pay down its $10.9 billion of long-term debt (as of September 30, 2013), which is equal to 32% of its market cap.
The company is also using the cash to increase production from its North American onshore properties. This approach is much cheaper than offshore drilling and has less political risk. Apache now gets 56% of its production from its onshore fields, up from 32% in 2009.
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Apache will use half of the proceeds to pay down its $10.9 billion of long-term debt (as of September 30, 2013), which is equal to 32% of its market cap.
The company is also using the cash to increase production from its North American onshore properties. This approach is much cheaper than offshore drilling and has less political risk. Apache now gets 56% of its production from its onshore fields, up from 32% in 2009.
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CHEVRON CORP. $122 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $231.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www. chevron.com) is the second-largest integrated oil company in the U.S., after ExxonMobil.
The company plans to spend $39.8 billion on exploration and upgrading its operations in 2014. That’s down 5.2% from the $42 billion it will likely spend in 2013. Chevron will devote 90% of the 2014 capital budget to extracting oil and gas. The remaining 10% will go toward improving its refineries and gas stations.
Among Chevron’s bigger projects is its 47.3%-owned Gorgon natural gas development off Australia’s west coast. Gorgon, which includes a plant that liquefies gas for export, is 75% complete and should start up in 2015. Its reserves will last 40 years.
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The company plans to spend $39.8 billion on exploration and upgrading its operations in 2014. That’s down 5.2% from the $42 billion it will likely spend in 2013. Chevron will devote 90% of the 2014 capital budget to extracting oil and gas. The remaining 10% will go toward improving its refineries and gas stations.
Among Chevron’s bigger projects is its 47.3%-owned Gorgon natural gas development off Australia’s west coast. Gorgon, which includes a plant that liquefies gas for export, is 75% complete and should start up in 2015. Its reserves will last 40 years.
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3M COMPANY $136 (New York symbol MMM; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 665.2 million; Market cap: $90.5 billion; Price-to-sales ratio: 3.0; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.3m.com) began operating as the Minnesota Mining & Manufacturing Company in 1902.
3M started off making sandpaper and abrasives for industrial customers. It later developed a variety of other consumer and manufacturing-related goods, such as pressure- sensitive masking and packaging tape, recording tape, reflective highway markings and medical bandages. The company now makes more than 55,000 different items.
The company owns a range of well-known brands, including Post-it notes, Scotch tape, Scotch-Brite household cleaning products, Scotchguard protection and Thinsulate insulation.
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3M started off making sandpaper and abrasives for industrial customers. It later developed a variety of other consumer and manufacturing-related goods, such as pressure- sensitive masking and packaging tape, recording tape, reflective highway markings and medical bandages. The company now makes more than 55,000 different items.
The company owns a range of well-known brands, including Post-it notes, Scotch tape, Scotch-Brite household cleaning products, Scotchguard protection and Thinsulate insulation.
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AGILENT TECHNOLOGIES INC. (New York symbol A) plans to break itself into two publicly traded companies. One of these businesses will keep the Agilent name and focus on testing equipment for medical-research labs. The second company will make testing systems for improving electronics, such as cellphones and computer equipment....
