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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TENNANT CO. $62 (New York symbol TNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 18.4 million; Market cap: $1.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.2%; TSINetwork Rating: Average; www.tennantco.com) makes industrial floor-cleaning equipment, including scrubbers, sweepers and polishers. It also manufactures cleaning gear for garages, stadiums, parking lots and city streets.
The company continues to enjoy strong demand for floor cleaners that use its ec-H2O technology, which uses electricity to make tap water act like a detergent. That eliminates the need for soaps and lowers the machine’s operating costs.
However, municipal governments, particularly in Europe, are spending less on cleaning equipment. As a result, Tennant’s sales rose just 0.4% in the three months ended June 30, 2013, to $200.2 million from $199.5 million a year earlier. If you exclude the negative impact of foreign exchange rates and contributions from acquisitions, sales would have risen 0.9%.
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The company continues to enjoy strong demand for floor cleaners that use its ec-H2O technology, which uses electricity to make tap water act like a detergent. That eliminates the need for soaps and lowers the machine’s operating costs.
However, municipal governments, particularly in Europe, are spending less on cleaning equipment. As a result, Tennant’s sales rose just 0.4% in the three months ended June 30, 2013, to $200.2 million from $199.5 million a year earlier. If you exclude the negative impact of foreign exchange rates and contributions from acquisitions, sales would have risen 0.9%.
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CONAGRA FOODS INC. $30 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 419.5 million; Market cap: $12.6 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.conagrafoods.com) reported that its sales rose 27.2% in its fiscal 2014 first quarter, which ended August 25, 2013, to $4.2 billion from $3.3 billion a year earlier.
That’s mainly due to private-label food maker Ralcorp, which it bought for $4.75 billion in January 2013. Ralcorp contributed $942.0 million to ConAgra’s sales in the latest quarter.
However, strong price competition is hurting sales of ConAgra’s branded foods. It also spent $26 million on developing new products.
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That’s mainly due to private-label food maker Ralcorp, which it bought for $4.75 billion in January 2013. Ralcorp contributed $942.0 million to ConAgra’s sales in the latest quarter.
However, strong price competition is hurting sales of ConAgra’s branded foods. It also spent $26 million on developing new products.
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VERIZON COMMUNICATIONS INC. $47 (New York symbol VZ, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $136.3 billion; Priceto- sales ratio: 1.2; Dividend yield: 4.5%; TSINetwork Rating: Average; www.verizon.com) is the second-largest wireless service provider in the U.S., with 100.1 million subscribers. Market leader AT&T has 107.9 million wireless customers.
Wireless now supplies 67% of Verizon’s revenue and 80% of its earnings. The remaining 33% of revenue and 20% of earnings comes from its 21.8 million phone and Internet customers.
Verizon’s revenue rose 10.7%, from $97.4 billion in 2008 to $107.8 billion in 2009. Revenue dipped to $106.6 billion in 2010 but then rebounded to $115.8 billion in 2012.
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Wireless now supplies 67% of Verizon’s revenue and 80% of its earnings. The remaining 33% of revenue and 20% of earnings comes from its 21.8 million phone and Internet customers.
Verizon’s revenue rose 10.7%, from $97.4 billion in 2008 to $107.8 billion in 2009. Revenue dipped to $106.6 billion in 2010 but then rebounded to $115.8 billion in 2012.
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ENERFLEX LTD. $14.07 (Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 78.0 million; Market cap: $1.1 billion; Dividend yield: 2.0%) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration equipment and power generators.
The company has a strong position in three expanding markets: U.S. and Canadian shale gas; Australian natural gas from coal beds; and conventional Middle Eastern natural gas, most of which gets converted to liquefied natural gas (LNG) for shipping worldwide.
In the quarter ended June 30, 2013, Enerflex’s revenue fell 12.3%, to $311.0 million from $354.6 million a year ago. That’s because the company saw lower sales across all of its markets. Earnings per share fell 4.0%, to $0.24 from $0.25.
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The company has a strong position in three expanding markets: U.S. and Canadian shale gas; Australian natural gas from coal beds; and conventional Middle Eastern natural gas, most of which gets converted to liquefied natural gas (LNG) for shipping worldwide.
In the quarter ended June 30, 2013, Enerflex’s revenue fell 12.3%, to $311.0 million from $354.6 million a year ago. That’s because the company saw lower sales across all of its markets. Earnings per share fell 4.0%, to $0.24 from $0.25.
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TOROMONT INDUSTRIES LTD. $22.86 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 76.6 million; Market cap: $1.8 billion; Dividend yield: 2.3%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division.
The company completed the spinoff of Enerflex Ltd. (see right) in July 2011. Shareholders received shares of the new Toromont and shares of Enerflex.
In the three months ended June 30, 2013, Toromont’s revenue fell 1.3%, to $374.7 million from $379.6 million a year earlier. Record sales at the CIMCO division failed to offset lower equipment sales and rentals, particularly to mining customers.
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The company completed the spinoff of Enerflex Ltd. (see right) in July 2011. Shareholders received shares of the new Toromont and shares of Enerflex.
In the three months ended June 30, 2013, Toromont’s revenue fell 1.3%, to $374.7 million from $379.6 million a year earlier. Record sales at the CIMCO division failed to offset lower equipment sales and rentals, particularly to mining customers.
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ALIMENTATION COUCHE-TARD $63.74 (Toronto symbol ATD.B; TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 179.4 million; Market cap: $11.8 billion; Dividend yield: 0.6%) reports that its sales jumped 48.0% in the three months ended July 21, 2013, to $8.9 billion from $6.0 billion a year earlier.
The gain mostly came from Norway’s Statoil Fuel & Retail ASA, which Couche-Tard bought for $2.7 billion in June 2012 (all figures except share price and market cap in U.S. dollars). It also benefited from higher fuel volumes and merchandise sales.
Excluding one-time items, earnings rose 20.9%, to $220.0 million from $182.0 million. Earnings per share rose 16.0%, to $1.16 from $1.00, on more shares outstanding. The latest earnings beat the consensus estimate of $0.95 a share.
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The gain mostly came from Norway’s Statoil Fuel & Retail ASA, which Couche-Tard bought for $2.7 billion in June 2012 (all figures except share price and market cap in U.S. dollars). It also benefited from higher fuel volumes and merchandise sales.
Excluding one-time items, earnings rose 20.9%, to $220.0 million from $182.0 million. Earnings per share rose 16.0%, to $1.16 from $1.00, on more shares outstanding. The latest earnings beat the consensus estimate of $0.95 a share.
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TIM HORTONS $59.06 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 151.0 million; Market cap: $9.0 billion; Dividend yield: 1.8%) has opened its first coffee-and-donut store in Kuwait under its franchise deal with Dubai-based Apparel Group. This is the company’s 32nd store in the Persian Gulf.
In February 2011, Tim Hortons signed a master license agreement with the Apparel Group to open 120 outlets in the United Arab Emirates (UAE), Qatar, Bahrain, Kuwait and Oman over a five-year period.
So far, the company has focused on growing in the key UAE cities of Dubai and Abu Dhabi. But it also entered Oman with two locations in 2012.
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In February 2011, Tim Hortons signed a master license agreement with the Apparel Group to open 120 outlets in the United Arab Emirates (UAE), Qatar, Bahrain, Kuwait and Oman over a five-year period.
So far, the company has focused on growing in the key UAE cities of Dubai and Abu Dhabi. But it also entered Oman with two locations in 2012.
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GOODYEAR TIRE & RUBBER CO. $22.17 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 245.5 million; Market cap: $5.4 billion; No dividends paid) has signed an important new labour contract with the United Steelworkers. The four-year deal covers about 8,000 workers at its six U.S. plants.
The agreement provides Goodyear with flexibility to reduce staffing and continues medical-benefit cost sharing.
Wages and benefits remain in line with the prior agreement. The contract protects Goodyear against strikes over its four-year term, but it also protects workers against closures at the six plants.
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The agreement provides Goodyear with flexibility to reduce staffing and continues medical-benefit cost sharing.
Wages and benefits remain in line with the prior agreement. The contract protects Goodyear against strikes over its four-year term, but it also protects workers against closures at the six plants.
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CARFINCO FINANCIAL GROUP $10.10 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888- 486-4356; www.carfinco.com; Shares outstanding: 26.4 million; Market cap: $266.6 million; Dividend yield: 4.8%) has now 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.
Persian operates in Massachusetts, New Hampshire, Maine, Connecticut and Vermont. It works with about 362 car dealers who use the company to get loans for their customers. Persian currently has $42.7 million U.S. in outstanding loans. To put that in perspective, Carfinco has $195.0 million of loans.
Growth by acquisition, especially into the U.S., adds risk. However, Carfinco is cutting that risk by keeping key members of Persian’s management in place, including Peter Miller, its founder and president. Miller sold the company to Carfinco and can receive an additional $2 million on the purchase price if Persian reaches certain performance targets over the next two years.
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Persian operates in Massachusetts, New Hampshire, Maine, Connecticut and Vermont. It works with about 362 car dealers who use the company to get loans for their customers. Persian currently has $42.7 million U.S. in outstanding loans. To put that in perspective, Carfinco has $195.0 million of loans.
Growth by acquisition, especially into the U.S., adds risk. However, Carfinco is cutting that risk by keeping key members of Persian’s management in place, including Peter Miller, its founder and president. Miller sold the company to Carfinco and can receive an additional $2 million on the purchase price if Persian reaches certain performance targets over the next two years.
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AMERIGO RESOURCES $0.43 (Toronto symbol ARG; TSINetwork Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 172.3 million; Market cap: $72.4 million; No dividends paid) processes copper and molybdenum from waste rock at Chile’s El Teniente, the world’s largest copper mine. The contract runs at least through 2037. Amerigo also has an agreement to process material from the nearby Cauquenes tailings pond.
Amerigo gets 94% of its revenue by processing copper. The remaining 6% comes from molybdenum.
In the three months ended June 30, 2013, Amerigo’s revenue fell 22.0%, to $31.4 million from $40.0 million a year earlier (all figures except share price and market cap in U.S. dollars). That’s because Amerigo’s copper production fell 17.5%, and molybdenum output declined 23.1%.
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Amerigo gets 94% of its revenue by processing copper. The remaining 6% comes from molybdenum.
In the three months ended June 30, 2013, Amerigo’s revenue fell 22.0%, to $31.4 million from $40.0 million a year earlier (all figures except share price and market cap in U.S. dollars). That’s because Amerigo’s copper production fell 17.5%, and molybdenum output declined 23.1%.
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