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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GOODYEAR TIRE & RUBBER CO. $24.42 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 246.9 million; Market cap: $6.0 billion; Dividend yield: 0.8%) is the world’s largest tire maker, with 52 plants in 22 countries.
In the quarter ended September 30, 2013, the sluggish global economy cut Goodyear’s sales by 5.0%, to $5.0 billion from $5.3 billion a year earlier. North American sales fell 9.1%, to $2.2 billion from $2.4 billion. Sales also declined 9.2% in Asia. That offset a slight increase in Europe and a 1.3% rise in Latin America.
However, earnings per share climbed sharply, to $0.68 from $0.45. The higher profits came from the company’s North American operations, which sold more replacement tires (they’re more profitable than new factory-installed car tires), and cut its costs.
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In the quarter ended September 30, 2013, the sluggish global economy cut Goodyear’s sales by 5.0%, to $5.0 billion from $5.3 billion a year earlier. North American sales fell 9.1%, to $2.2 billion from $2.4 billion. Sales also declined 9.2% in Asia. That offset a slight increase in Europe and a 1.3% rise in Latin America.
However, earnings per share climbed sharply, to $0.68 from $0.45. The higher profits came from the company’s North American operations, which sold more replacement tires (they’re more profitable than new factory-installed car tires), and cut its costs.
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GENUINE PARTS CO. $82 (www.genpt.com) is buying Edmontonbased Commercial Solutions Inc. This firm distributes industrial products, such as bearings and transmission parts, across Canada. Genuine Parts didn’t say how much it would pay when it completes this purchase in the first quarter of 2014, but the deal will add $100 million to its annual revenue of $13.7 billion....
GENERAL ELECTRIC CO. $27 (www.ge.com) has raised its quarterly dividend by 15.8%, to $0.22 a share from $0.19. The new annual rate of $0.88 yields 3.3%. Buy.
BOEING CO. $135 (www.boeing.com) is seeing stronger demand for its passenger planes as airlines upgrade their aging fleets with more efficient models. As a result, it has increased its dividend by 50.5%. The new annual rate of $2.92 a share yields 2.2%. Boeing also plans to buy back $10 billion worth of its shares, or about 10% of the total outstanding, over the next three years....
AMERICAN EXPRESS CO. $86 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.1 billion; Market cap: $94.6 billion; Price-to-sales ratio: 2.8; Dividend yield: 1.1%; TSINetwork Rating: Average; www. americanexpress.com) gets most of its revenue from the fees it charges merchants who accept its charge cards (which have no pre-set spending limit and must be paid in full each month) and credit cards (which can carry a balance).
Unlike other credit card companies, such as Visa and MasterCard, Amex is also a lender. That lets it collect interest payments on its cardholders’outstanding balances.
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Unlike other credit card companies, such as Visa and MasterCard, Amex is also a lender. That lets it collect interest payments on its cardholders’outstanding balances.
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ADOBE SYSTEMS INC. $59 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 501.8 million; Market cap: $29.6 billion; Price-to-sales ratio: 7.0; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) earned $164.6 million, or $0.32 a share, in its fiscal 2013 fourth quarter, which ended November 29, 2013. That’s down 46.5% from $307.9 million, or $0.61 a share, a year earlier. Revenue fell 9.7%, to $1.04 billion from $1.15 billion.
Last year, the company starting selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription instead of a one-time purchase. Adobe added 402,000 Creative Cloud subscribers during the quarter, to bring its total to 1.44 million. That beat its goal of 1.25 million users.
The stock is up 57% in the past year and now trades at 53.6 times the $1.10 a share that Adobe will likely earn in fiscal 2014. That’s a high p/e ratio for a company that mainly serves customers in cyclical businesses like publishing. However, its switch to sale-by-subscription could generate a lot of long-term growth.
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Last year, the company starting selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription instead of a one-time purchase. Adobe added 402,000 Creative Cloud subscribers during the quarter, to bring its total to 1.44 million. That beat its goal of 1.25 million users.
The stock is up 57% in the past year and now trades at 53.6 times the $1.10 a share that Adobe will likely earn in fiscal 2014. That’s a high p/e ratio for a company that mainly serves customers in cyclical businesses like publishing. However, its switch to sale-by-subscription could generate a lot of long-term growth.
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STATE STREET CORP. $71 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 439.0 million; Market cap: $31.2 billion; Price-to-sales ratio: 3.3; Dividend yield: 1.5%; TSINetwork Rating: Extra Risk; www. statestreet.com) sells accounting and administrative services to large institutional investors, such as mutual funds and pension plans.
The company’s fee income rises and falls with the value of the mutual funds and other securities it manages. Thanks to improving stock markets and new contracts, State Street’s earnings rose 13.5% in the three months ended September 30, 2013, to $537 million from $473 million a year earlier.
The company spent $560 million buying back its shares in the quarter. As a result, earnings per share gained 20.2%, to $1.19 from $0.99. Revenue increased 3.4%, to $2.5 billion from $2.4 billion.
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The company’s fee income rises and falls with the value of the mutual funds and other securities it manages. Thanks to improving stock markets and new contracts, State Street’s earnings rose 13.5% in the three months ended September 30, 2013, to $537 million from $473 million a year earlier.
The company spent $560 million buying back its shares in the quarter. As a result, earnings per share gained 20.2%, to $1.19 from $0.99. Revenue increased 3.4%, to $2.5 billion from $2.4 billion.
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PEPSICO INC. $81 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.5 billion; Market cap: $121.5 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.pepsico.com) has won a contract to supply soft drinks to 975 Buffalo Wild Wings restaurants in the U.S. and Canada.
The two companies will also take advantage of PepsiCo’s alliances with the National Football League and Major League Baseball to develop sports-related marketing campaigns.
In addition, Buffalo Wild Wings will develop new menu items that use PepsiCo’s snack foods, including Frito-Lay and Doritos chips. PepsiCo didn’t say how much the deal is worth or how long it will last.
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The two companies will also take advantage of PepsiCo’s alliances with the National Football League and Major League Baseball to develop sports-related marketing campaigns.
In addition, Buffalo Wild Wings will develop new menu items that use PepsiCo’s snack foods, including Frito-Lay and Doritos chips. PepsiCo didn’t say how much the deal is worth or how long it will last.
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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....