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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Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....
ADOBE SYSTEMS (Nasdaq symbol ADBE; www.adobe.com) makes software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use its software to create print publications and web pages....
TEMPUR SEALY $39.81 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempursealy.com; Shares outstanding: 60.4 million; Market cap: $2.4 billion; No dividends paid) completed its $1.3- billion purchase of rival Sealy in March 2013. This was a major acquisition for Tempur Sealy (formerly Tempur-Pedic), but it has let the company diversify into the market for traditional spring-coil beds.
The purchase should help Tempur Sealy offset rising competition in its current business; the company makes and distributes mattresses and neck pillows made of its Tempur material, which conforms to the body to provide support and alleviate pressure points.
Competitors Simmons Bedding and Serta have both successfully launched memory-foam mattresses that directly compete with Tempur Sealy’s products.
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The purchase should help Tempur Sealy offset rising competition in its current business; the company makes and distributes mattresses and neck pillows made of its Tempur material, which conforms to the body to provide support and alleviate pressure points.
Competitors Simmons Bedding and Serta have both successfully launched memory-foam mattresses that directly compete with Tempur Sealy’s products.
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WYNDHAM WORLDWIDE $62.75 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973- 753-6000; www.wyndhamworldwide.com; Shares outstanding: 133.0 million; Market cap: $8.3 billion; Dividend yield: 1.9%) is one of the world’s largest hospitality companies, with 7,410 franchised hotels worldwide.
In addition to hotels, Wyndham manages vacation resorts, rental properties, luxury clubs and time-shares. The company now has over 106,000 vacation rental properties in 100 countries.
In the three months ended June 30, 2013, Wyndham’s revenue rose 10.0%, to $1.25 billion from $1.14 billion a year earlier. The company gets most of its revenue from vacation rather than business travel, and vacation bookings rose in the latest quarter. That helped push up its occupancy rate by 1.5%.
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In addition to hotels, Wyndham manages vacation resorts, rental properties, luxury clubs and time-shares. The company now has over 106,000 vacation rental properties in 100 countries.
In the three months ended June 30, 2013, Wyndham’s revenue rose 10.0%, to $1.25 billion from $1.14 billion a year earlier. The company gets most of its revenue from vacation rather than business travel, and vacation bookings rose in the latest quarter. That helped push up its occupancy rate by 1.5%.
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SASOL LTD. (ADR) $50.56 (New York symbol SSL; TSINetwork Rating: Extra Risk) (082- 883-9697; www.sasol.com; ADRs outstanding: 649.2 million; Market cap: $34.4 billion; Dividend yield: 5.3%) has developed a technology to convert coal and natural gas into motor fuels and is now the world’s largest producer of fuel from coal at its facility in Secunda, South Africa.
In the year ended June 30, 2013, Sasol’s revenue rose 9.7%, to 146.8 billion South African rand (1 rand = $0.10 U.S.) from 133.8 billion rand the previous year. Earnings per ADR rose 24.5%, to 52.62 rand from 42.28 rand. The U.S. dollar rose against the rand, which pushed up the value of Sasol’s sales outside South Africa.
Sasol is considering spending up to $21 billion U.S. to build a complex in Louisiana that would turn natural gas into chemicals, diesel and other fuels.
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In the year ended June 30, 2013, Sasol’s revenue rose 9.7%, to 146.8 billion South African rand (1 rand = $0.10 U.S.) from 133.8 billion rand the previous year. Earnings per ADR rose 24.5%, to 52.62 rand from 42.28 rand. The U.S. dollar rose against the rand, which pushed up the value of Sasol’s sales outside South Africa.
Sasol is considering spending up to $21 billion U.S. to build a complex in Louisiana that would turn natural gas into chemicals, diesel and other fuels.
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GOODYEAR TIRE & RUBBER CO. $22.44 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 246.0 million; Market cap: $5.5 billion; Dividend yield: 0.9%) will resume paying dividends with a quarterly payment of $0.05 a share in December 2013. That gives the stock a 0.9% yield, based on today’s price. The company last paid a dividend in December 2002.
The tire maker has also announced a $100-million share buyback plan, which it will mainly use to offset any potential share dilution caused by equity compensation programs for its employees.
The company is selling more tires in emerging markets in Latin America and Asia, while cost cuts and falling rubber prices are helping boost its profits.
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The tire maker has also announced a $100-million share buyback plan, which it will mainly use to offset any potential share dilution caused by equity compensation programs for its employees.
The company is selling more tires in emerging markets in Latin America and Asia, while cost cuts and falling rubber prices are helping boost its profits.
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FIRSTSERVICE CORP. $41.59 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 31.9 million; Market cap: $1.4 billion; Dividend yield: 1.0%) is selling its 300- employee Field Asset Services subsidiary to Assurant Inc. for $55 million. This business specializes in preserving the value of foreclosed and abandoned homes by performing ongoing services, such as inspections, interior and exterior maintenance, trash removal, lawn maintenance and winterization.
FirstService bought Field Asset Services in 2007, and the business benefited from the housing crisis in the U.S., which saw many properties foreclosed and abandoned.
The sale is timely for FirstService, because increased U.S. government regulations are slowing the rate at which banks and other mortgage providers can foreclose on homeowners who are behind on their payments. Housing markets are also slowly recovering. As a result, there have been fewer newly foreclosed houses for Field Asset Services to manage.
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FirstService bought Field Asset Services in 2007, and the business benefited from the housing crisis in the U.S., which saw many properties foreclosed and abandoned.
The sale is timely for FirstService, because increased U.S. government regulations are slowing the rate at which banks and other mortgage providers can foreclose on homeowners who are behind on their payments. Housing markets are also slowly recovering. As a result, there have been fewer newly foreclosed houses for Field Asset Services to manage.
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THE CHURCHILL CORP. $8.87 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.7 million; Market cap: $218.7 million; Dividend yield: 5.4%) provides building construction, commercial and industrial electrical contracting, earthmoving and industrial insulation services to government and private sector clients, mainly in Western Canada.
Churchill’s Stuart Olson Dominion Construction division has just won $400 million worth of contracts. These projects involve building municipal, commercial and industrial buildings, as well as arenas, schools and hospitals.
To put these agreements in perspective, Churchill’s total backlog stood at a near record $1.8 billion on June 30, 2013.
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Churchill’s Stuart Olson Dominion Construction division has just won $400 million worth of contracts. These projects involve building municipal, commercial and industrial buildings, as well as arenas, schools and hospitals.
To put these agreements in perspective, Churchill’s total backlog stood at a near record $1.8 billion on June 30, 2013.
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NISSAN MOTOR (ADR) $20.51 (Nasdaq symbol NSANY; TSINetwork Rating: Above Average) (310-771-3111; www.nissan-global.com; Shares outstanding: 2.3 billion; Market cap: $45.7 billion; No dividends paid) has reported lower U.S. sales for the month of September, along with most other automakers. However, this September was unique because it had fewer selling days than the prior year.
Overall, Nissan sold 86,868 cars and trucks in the U.S. during the month. That’s down 5.5% from 91,907 in September 2012. The Nissan division’s sales fell 5.6%, to 77,828 vehicles. Infiniti sales dropped 4.3%, to 9,040 vehicles.
Like all automakers, Nissan needs a renewed global economic recovery to boost its sales. Meanwhile, its outlook is positive.
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Overall, Nissan sold 86,868 cars and trucks in the U.S. during the month. That’s down 5.5% from 91,907 in September 2012. The Nissan division’s sales fell 5.6%, to 77,828 vehicles. Infiniti sales dropped 4.3%, to 9,040 vehicles.
Like all automakers, Nissan needs a renewed global economic recovery to boost its sales. Meanwhile, its outlook is positive.
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RUSSEL METALS $26.72 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 60.9 million; Market cap: $1.6 billion; Dividend yield: 5.2%) is one of North America’s largest metal distributors. It serves 39,000 clients at 54 locations in Canada and 12 in the U.S.
In the quarter ended June 30, 2013, revenue rose 5.5%, to $758.1 million from $718.7 million a year earlier. Revenue at the company’s metal-services business declined 13%. That’s because the slower economy pushed down steel demand.
However, the energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue jump 63% on higher drilling activity.
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In the quarter ended June 30, 2013, revenue rose 5.5%, to $758.1 million from $718.7 million a year earlier. Revenue at the company’s metal-services business declined 13%. That’s because the slower economy pushed down steel demand.
However, the energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue jump 63% on higher drilling activity.
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