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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TIM HORTONS $62.68 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 147.1 million; Market cap: $9.1 billion; Dividend yield: 1.7%) operates 3,500 coffeeand- donut shops in Canada, 817 in the U.S. and 33 in the Persian Gulf.
In the three months ended September 30, 2013, Tim Hortons’ sales rose 2.9%, to $825.4 million from $802.0 million a year earlier. Same-store sales gained 1.7% at its Canadian outlets and 3.0% in the U.S. Earnings per share rose 6.9%, to $0.77 from $0.72.
The company continues to benefit from recently introduced menu items, such as panini sandwiches. It also raised its prices to cover higher ingredient costs. At the same time, it’s working on simplifying its menu displays and speeding up service, both in-store and at the drive-through.
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In the three months ended September 30, 2013, Tim Hortons’ sales rose 2.9%, to $825.4 million from $802.0 million a year earlier. Same-store sales gained 1.7% at its Canadian outlets and 3.0% in the U.S. Earnings per share rose 6.9%, to $0.77 from $0.72.
The company continues to benefit from recently introduced menu items, such as panini sandwiches. It also raised its prices to cover higher ingredient costs. At the same time, it’s working on simplifying its menu displays and speeding up service, both in-store and at the drive-through.
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DOMINO’S PIZZA $69.96 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 55.7 million; Market cap: $3.9 billion; Dividend yield: 1.1%) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,500 outlets in the U.S. and over 70 other countries. Franchisees run most of these stores.
The company’s earnings per share rose 18.6% in the quarter ended September 8, 2013, to $0.51 from $0.43 a year earlier. The latest figure fell just short of the consensus estimate of $0.52. Sales gained 6.9%, to $404.1 million from $378.1 million. That beat the consensus estimate of $403.0 million. Same-store sales rose 5.0% internationally and 5.4% in the U.S.
Domino’s continues to boost its sales by aggressively promoting its new pizza recipes. It’s also profiting by moving into ordering online and through software applications, or apps, on smartphones. In addition, it still has lots of growth potential overseas.
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The company’s earnings per share rose 18.6% in the quarter ended September 8, 2013, to $0.51 from $0.43 a year earlier. The latest figure fell just short of the consensus estimate of $0.52. Sales gained 6.9%, to $404.1 million from $378.1 million. That beat the consensus estimate of $403.0 million. Same-store sales rose 5.0% internationally and 5.4% in the U.S.
Domino’s continues to boost its sales by aggressively promoting its new pizza recipes. It’s also profiting by moving into ordering online and through software applications, or apps, on smartphones. In addition, it still has lots of growth potential overseas.
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AEROPOSTALE $8.14 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646- 485-5410; www.aeropostale.com; Shares outstanding: 78.5 million; Market cap: $639.7 million; No dividends paid) has adopted a shareholder rights plan. These schemes are often called poison pills, because they aim to thwart hostile takeovers by issuing many new shares to existing shareholders if someone tries to take over a company.
A number of private equity firms now hold interests in Aeropostale, and they are pushing it to put itself up for sale so one or more of them can take it private.
It’s uncertain which direction Aeropostale will take, or whether any of its private equity shareholders can force a sale. However, their involvement does highlight its underlying value and turnaround potential.
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A number of private equity firms now hold interests in Aeropostale, and they are pushing it to put itself up for sale so one or more of them can take it private.
It’s uncertain which direction Aeropostale will take, or whether any of its private equity shareholders can force a sale. However, their involvement does highlight its underlying value and turnaround potential.
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CARFINCO FINANCIAL GROUP $12.07 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888- 486-4356; www.carfinco.com; Shares outstanding: 26.5 million; Market cap: $321.6 million; Dividend yield: 4.0%) provides car loans to consumers who can’t meet the criteria of traditional lenders, like banks.
In September 2013, Carfinco expanded into the U.S. through its $9.5-million purchase of Persian Acceptance Corp., an automotive lender that also caters to less-affluent borrowers. The acquisition boosted Carfinco’s loans outstanding by about 22%.
In the three months ended September 30, 2013, Carfinco’s revenue rose 17.7%, to $21.4 million from $18.2 million a year earlier. The company loaned a record $46.5 million in the latest quarter, up 9.2% from $42.6 million.
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In September 2013, Carfinco expanded into the U.S. through its $9.5-million purchase of Persian Acceptance Corp., an automotive lender that also caters to less-affluent borrowers. The acquisition boosted Carfinco’s loans outstanding by about 22%.
In the three months ended September 30, 2013, Carfinco’s revenue rose 17.7%, to $21.4 million from $18.2 million a year earlier. The company loaned a record $46.5 million in the latest quarter, up 9.2% from $42.6 million.
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INTACT FINANCIAL CORP. $68.29 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 131.5 million; Market cap: $9.0 billion; Dividend yield: 2.6%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.
In the three months ended September 30, 2013, Intact’s revenue rose 5.7%, to $1.9 billion from $1.8 billion a year earlier. The company earned $0.39 a share, down sharply from $0.90.
However, the latest results include a one-time loss of $1.52 a share related to the Lac-Mégantic rail tragedy and major rain and hail storms in Quebec, Ontario and Alberta. One-time losses amounted to $1.02 a share a year ago.
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In the three months ended September 30, 2013, Intact’s revenue rose 5.7%, to $1.9 billion from $1.8 billion a year earlier. The company earned $0.39 a share, down sharply from $0.90.
However, the latest results include a one-time loss of $1.52 a share related to the Lac-Mégantic rail tragedy and major rain and hail storms in Quebec, Ontario and Alberta. One-time losses amounted to $1.02 a share a year ago.
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PASON SYSTEMS $22.28 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403- 301-3400; www.pason.com; Shares outstanding: 82.1 million; Market cap: $1.8 billion; Dividend yield: 2.5%) rents equipment for monitoring and managing land-based oil and gas rigs throughout Canada, the U.S., Mexico and Argentina. It also provides communication systems to remotely collect data from drilling operations.
In the quarter ended September 30, 2013, Pason’s revenue rose 8.1%, to $104.0 million from $96.3 million a year earlier. Strong international sales and slightly higher revenue in Canada offset slower activity in the U.S. Cash flow per share jumped 51.1%, to $0.68 from $0.45.
Pason holds cash of $198.1 million, or $2.41 a share, and has no debt.
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In the quarter ended September 30, 2013, Pason’s revenue rose 8.1%, to $104.0 million from $96.3 million a year earlier. Strong international sales and slightly higher revenue in Canada offset slower activity in the U.S. Cash flow per share jumped 51.1%, to $0.68 from $0.45.
Pason holds cash of $198.1 million, or $2.41 a share, and has no debt.
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CIMAREX ENERGY $99.54 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 86.9 million; Market cap: $8.7 billion; Dividend yield: 0.6%) produces and explores for natural gas and oil. Gas makes up 48% of its output.
Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (47% of production); the Permian Basin of western Texas and southeastern New Mexico (49%); and the Texas Gulf Coast (4%).
In the three months ended September 30, 2013, Cimarex’s production averaged 716.8 million cubic feet of natural gas equivalent per day (including oil). That’s up 12.8% from 635.1 million cubic feet a year earlier.
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Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (47% of production); the Permian Basin of western Texas and southeastern New Mexico (49%); and the Texas Gulf Coast (4%).
In the three months ended September 30, 2013, Cimarex’s production averaged 716.8 million cubic feet of natural gas equivalent per day (including oil). That’s up 12.8% from 635.1 million cubic feet a year earlier.
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DEVON ENERGY CORP. $59.34 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 406.0 million; Market cap: $24.2 billion; Dividend yield: 1.5%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 57% gas and 43% oil.
In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.
To further increase its North American output, Devon recently agreed to pay GeoSouthern Energy $6 billion for oil-producing assets and other properties in Texas’s Eagle Ford shale formation.
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In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.
To further increase its North American output, Devon recently agreed to pay GeoSouthern Energy $6 billion for oil-producing assets and other properties in Texas’s Eagle Ford shale formation.
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DUNDEE REIT $28.18 (Toronto symbol D.UN; TSINetwork Rating: Extra Risk) (416-365-3535; www.dundeereit.com; Units outstanding: 104.9 million; Market cap: $3.0 billion; Dividend yield: 8.0%) owns and manages 24.3 million square feet of office and retail space across Canada.
As the Canadian economy improves, interest rates will likely rise. That increase—or the anticipation of it—can push down prices of REITs and high-yielding stocks, such as utilities. That’s largely why a number of REITs, including Dundee, have declined.
When interest rates rise, REITs may suffer because they have a lot of mortgage debt, and it’s more expensive to raise money and refinance existing loans. As well, their units, which typically offer high yields, compete with fixed-income instruments for investor interest.
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As the Canadian economy improves, interest rates will likely rise. That increase—or the anticipation of it—can push down prices of REITs and high-yielding stocks, such as utilities. That’s largely why a number of REITs, including Dundee, have declined.
When interest rates rise, REITs may suffer because they have a lot of mortgage debt, and it’s more expensive to raise money and refinance existing loans. As well, their units, which typically offer high yields, compete with fixed-income instruments for investor interest.
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