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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GENERAL ELECTRIC CO. $27 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.2 billion; Market cap: $275.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.ge.com) plans to spin off its North American retail finance business as a separate company.
This business, part of its GE Capital subsidiary, provides credit card loans through a variety of retailers, such as Wal-Mart and J.C. Penney. It also loans money directly to consumers. GE will hang on the international portion of the retail finance business.
The spinoff is part of the company’s plan to cut GE Capital’s assets to half of what they were prior to the 2008 financial crisis.
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This business, part of its GE Capital subsidiary, provides credit card loans through a variety of retailers, such as Wal-Mart and J.C. Penney. It also loans money directly to consumers. GE will hang on the international portion of the retail finance business.
The spinoff is part of the company’s plan to cut GE Capital’s assets to half of what they were prior to the 2008 financial crisis.
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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) has suspended work on its $10-billion Rosebank offshore oil project in the North Sea due to rising costs. Chevron owns 40% of this project. The company and its partners will make a decision on whether to proceed with Rosebank by late 2014.
Meanwhile, the company recently began pumping oil at its Papa-Terra offshore platform near Brazil. Chevron owns 37.5% of this operation, while Petroleo Brasileiro S.A. (New York symbol PBR) owns the remaining 62.5%.
Papa-Terra should produce 140,000 barrels a day by the end of 2014. Chevron’s share of 52,500 barrels is equal to 2% of its current daily output.
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Meanwhile, the company recently began pumping oil at its Papa-Terra offshore platform near Brazil. Chevron owns 37.5% of this operation, while Petroleo Brasileiro S.A. (New York symbol PBR) owns the remaining 62.5%.
Papa-Terra should produce 140,000 barrels a day by the end of 2014. Chevron’s share of 52,500 barrels is equal to 2% of its current daily output.
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SONY CORP. ADRs $19 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $19.0 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.sony.com) now plans to make fewer than 20 movies a year, down from around 23 in previous years. That’s due to big losses on films like White House Down and After Earth.
Instead, the company plans to expand its better-performing television production business. Sony currently produces 38 series, including popular shows like Breaking Bad and The Blacklist.
Making TV shows is less expensive than feature films, which lowers risk and enhances potential profit.
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Instead, the company plans to expand its better-performing television production business. Sony currently produces 38 series, including popular shows like Breaking Bad and The Blacklist.
Making TV shows is less expensive than feature films, which lowers risk and enhances potential profit.
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INTERNATIONAL FLAVORS & FRAGRANCES INC. $88 (New York symbol IFF; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $7.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.iff.com) produces compounds that improve the taste of food and make consumer products smell better.
The company continues to benefit from rising demand in fast-growing markets like China, India and Turkey. In the three months ended September 30, 2013, sales in these countries rose 8% and now supply 48% of IFF’s total. That helped push up the company’s overall sales by 4.7% in the quarter, to $742.3 million from $709.0 million a year earlier. Earnings per share gained 13.0%, to $1.22 from $1.08.
IFF is a buy.
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The company continues to benefit from rising demand in fast-growing markets like China, India and Turkey. In the three months ended September 30, 2013, sales in these countries rose 8% and now supply 48% of IFF’s total. That helped push up the company’s overall sales by 4.7% in the quarter, to $742.3 million from $709.0 million a year earlier. Earnings per share gained 13.0%, to $1.22 from $1.08.
IFF is a buy.
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GENERAL MILLS INC. $51 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 634.3 million; Market cap: $31.6 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.generalmills.com) expects costs for ingredients like wheat and corn to rise 3% in its 2014 fiscal year, which ends May 24, 2014. It is also spending more to develop new foods, like gluten-free cereals.
However, cost controls should help offset these increases. As a result, General Mills still expects to earn $2.87 to $2.90 a share in fiscal 2014. The stock trades at a reasonable 17.7 times the midpoint of that range.
General Mills is a buy.
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However, cost controls should help offset these increases. As a result, General Mills still expects to earn $2.87 to $2.90 a share in fiscal 2014. The stock trades at a reasonable 17.7 times the midpoint of that range.
General Mills is a buy.
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DIEBOLD INC. $34 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 63.8 million; Market cap: $2.2 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.4%; TSINetwork Rating: Average; www.diebold.com) has cut jobs and sold two plants in response to slowing ATM sales in the U.S. These moves should cut its annual costs by $100 million to $150 million by the end of 2015. In the quarter ended September 30, 2013, Diebold lost $0.34 a share, compared to a profit of $0.25 a share a year earlier. Without unusual items, earnings per share jumped 51.4%, to $0.56 from $0.37.
Revenue fell 0.6%, to $705.4 million from $709.9 million. The company continues to see strong ATM demand from banks in Latin America and Asia, which is helping offset weaker sales in the U.S.
The company’s earnings should rise 29.6%, from a projected $1.35 a share in 2013 to $1.75 in 2014. The stock trades at a somewhat high 19.4 times the 2014 estimate. However, that’s still reasonable, particularly as Diebold continues to expand in developing markets. As well, it now gets half of its revenue from recurring software upgrades and other services. The $1.15 dividend still seems safe and yields 3.4%.
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Revenue fell 0.6%, to $705.4 million from $709.9 million. The company continues to see strong ATM demand from banks in Latin America and Asia, which is helping offset weaker sales in the U.S.
The company’s earnings should rise 29.6%, from a projected $1.35 a share in 2013 to $1.75 in 2014. The stock trades at a somewhat high 19.4 times the 2014 estimate. However, that’s still reasonable, particularly as Diebold continues to expand in developing markets. As well, it now gets half of its revenue from recurring software upgrades and other services. The $1.15 dividend still seems safe and yields 3.4%.
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AGILENT TECHNOLOGIES INC. $54 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 333.0 million; Market cap: $18.0 billion; Price-to-sales ratio: 2.8; Dividend yield: 1.0%; TSINetwork Rating: Average; www.agilent.com) 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.
In the parent company’s 2013 fiscal year, which ended October 31, 2013, the division that will form this new firm saw its sales rise 9.9%, to $3.9 billion from $3.5 billion in fiscal 2012. That’s mainly due to strong demand from pharmaceutical makers, and rising sales of gear for testing food safety in China and other developing countries. This company will pay a dividend comparable to Agilent’s current 1.0% yield.
The second company will make testing systems for improving electronics, such as cellphones and computer equipment. Its fiscal 2013 revenue fell 12.9%, to $2.9 billion from $3.3 billion. That’s partly because U.S. budget cuts hurt demand from aerospace and defence clients. However, new testing systems for wireless networks should boost this firm’s revenue in fiscal 2014. This second firm will not pay a dividend, at least initially.
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In the parent company’s 2013 fiscal year, which ended October 31, 2013, the division that will form this new firm saw its sales rise 9.9%, to $3.9 billion from $3.5 billion in fiscal 2012. That’s mainly due to strong demand from pharmaceutical makers, and rising sales of gear for testing food safety in China and other developing countries. This company will pay a dividend comparable to Agilent’s current 1.0% yield.
The second company will make testing systems for improving electronics, such as cellphones and computer equipment. Its fiscal 2013 revenue fell 12.9%, to $2.9 billion from $3.3 billion. That’s partly because U.S. budget cuts hurt demand from aerospace and defence clients. However, new testing systems for wireless networks should boost this firm’s revenue in fiscal 2014. This second firm will not pay a dividend, at least initially.
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MOTOROLA SOLUTIONS INC. $66 (New York symbol MSI; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 258.7 million; Market cap: $17.1 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.9%; TSINetwork Rating: Average; www.motorolasolutions.com) makes bar-code scanners and radios for police and fire vehicles.
In the third quarter of 2013, overall sales fell 1.9%, to $2.11 billion from $2.15 billion a year earlier. That’s partly due to the recent federal government shutdown: sales to government clients (which account for 69% of Motorola Solutions’ total sales) declined 3.7%. However, sales to businesses (31%) rose 2.4%.
The company’s new restructuring plan, which includes closing some plants and cutting jobs, should save it $50 million a year by the end of 2014. It is already realizing some of these savings, which helped increase its earnings by 49.0% in the latest quarter, to $307 million from $206 million. Per-share earnings gained 61.1%, to $1.16 from $0.72, on fewer shares outstanding. Without unusual items, earnings per share rose 57.1%, to $1.32 from $0.84.
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In the third quarter of 2013, overall sales fell 1.9%, to $2.11 billion from $2.15 billion a year earlier. That’s partly due to the recent federal government shutdown: sales to government clients (which account for 69% of Motorola Solutions’ total sales) declined 3.7%. However, sales to businesses (31%) rose 2.4%.
The company’s new restructuring plan, which includes closing some plants and cutting jobs, should save it $50 million a year by the end of 2014. It is already realizing some of these savings, which helped increase its earnings by 49.0% in the latest quarter, to $307 million from $206 million. Per-share earnings gained 61.1%, to $1.16 from $0.72, on fewer shares outstanding. Without unusual items, earnings per share rose 57.1%, to $1.32 from $0.84.
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PETSMART INC. $74 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 103.9 million; Market cap: $7.7 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.0%; TSINetwork Rating: Above Average; www.petm.com) operates 1,314 pet stores in the U.S. and Canada. It also has 196 in-store PetsHotels, which look after animals while their owners are away.
In the third quarter of its 2014 fiscal year, which ended November 3, 2013, PetSmart’s earnings rose 12.0%, to $92.2 million from $82.3 million a year earlier. The company bought back $30 million of its shares during the quarter. Due to fewer shares outstanding, earnings per share rose 17.3%, to $0.88 from $0.75.
Sales rose 4.0%, to $1.7 billion from $1.6 billion. Same-store sales gained 2.7%, while sales of pet services, such as grooming and training, rose 5.2%. Services accounted for 10.9% of PetSmart’s total sales.
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In the third quarter of its 2014 fiscal year, which ended November 3, 2013, PetSmart’s earnings rose 12.0%, to $92.2 million from $82.3 million a year earlier. The company bought back $30 million of its shares during the quarter. Due to fewer shares outstanding, earnings per share rose 17.3%, to $0.88 from $0.75.
Sales rose 4.0%, to $1.7 billion from $1.6 billion. Same-store sales gained 2.7%, while sales of pet services, such as grooming and training, rose 5.2%. Services accounted for 10.9% of PetSmart’s total sales.
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JONES GROUP INC. $14 (New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 79.7 million; Market cap: $1.1 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.jonesgroupinc.com) designs clothing, accessories and footwear for men and women. Its major brands include Jones New York, Gloria Vanderbilt, Rachel Roy, Anne Klein and Nine West. Jones sells its products through department stores and 543 company-owned outlets.
In the three months ended October 5, 2013, Jones’s sales fell 1.3%, to $1.02 billion from $1.03 billion a year earlier. Weaker-than-expected back-to-school sales forced many of Jones’s U.S. department store clients to cut their prices to clear unsold merchandise.
Earnings fell 17.0%, to $35.6 million from $42.9 million. Due to fewer shares outstanding, earnings per share declined 15.8%, to $0.48 from $0.57.
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In the three months ended October 5, 2013, Jones’s sales fell 1.3%, to $1.02 billion from $1.03 billion a year earlier. Weaker-than-expected back-to-school sales forced many of Jones’s U.S. department store clients to cut their prices to clear unsold merchandise.
Earnings fell 17.0%, to $35.6 million from $42.9 million. Due to fewer shares outstanding, earnings per share declined 15.8%, to $0.48 from $0.57.
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