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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GOOGLE INC. (Nasdaq symbol GOOG; www.google.com) is the world’s top Internet search engine, with about two-thirds of this market. The company makes money by selling advertising on its websites. Google gets 96% of its revenue from advertising. The company also offers a variety of free services such as Gmail (email), YouTube (videos) and Google+ (social networking). These services help draw more users to Google’s websites, which lets the company sell more ads and charge higher ad rates....
VISA INC. $183 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 792.0 million; Market cap: $144.9 billion; Price-to-sales ratio: 10.9; Dividend yield: 0.7%; TSINetwork Rating: Above Average; www.visa.com) operates the world’s largest electronic payments network. The company processes credit, debit, prepaid and commercial payments under the Visa, Visa Electron, Interlink and PLUS brands.
Visa gets most of its revenue from fees it charges card issuers and merchants for using its network. These fees are based on payment volume, transactions processed and other factors. The responsibility for evaluating customer creditworthiness and collecting payments lies with the banks that issue the cards, not with Visa.
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Visa gets most of its revenue from fees it charges card issuers and merchants for using its network. These fees are based on payment volume, transactions processed and other factors. The responsibility for evaluating customer creditworthiness and collecting payments lies with the banks that issue the cards, not with Visa.
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PFIZER INC. $28 (New York symbol PFE; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 7.1 billion; Market cap: $198.8 billion; Price-to-sales ratio: 3.6; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.pfizer.com) has completed its plan to hand out shares in its 80.2%-owned animalhealth subsidiary to its own shareholders. This business, ZOETIS INC. $31 (New York symbol ZTS, Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 500.0 million; Market cap: $15.5 billion; Price-to-sales ratio: 3.6; Dividend yield: 0.8%; TSINetwork Rating: Average; www.zoetis.com) makes drugs and vaccines for livestock and pets.
Pfizer set the exchange ratio at 0.9898 of a Zoetis share for each Pfizer share tendered. Due to much stronger-than-expected demand for Zoetis stock, Pfizer will accept less than half of the shares tendered to the offer.
Zoetis has long-term appeal. The company spends around 8% of its sales on research, which should help it profit as developing countries like China raise more livestock for food. However, the stock trades at a high 22.0 times Zoetis’s forecast 2013 earnings of $1.41 a share. Zoetis pays a quarterly dividend of $0.065 a share, for a 0.8% annualized yield.
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Pfizer set the exchange ratio at 0.9898 of a Zoetis share for each Pfizer share tendered. Due to much stronger-than-expected demand for Zoetis stock, Pfizer will accept less than half of the shares tendered to the offer.
Zoetis has long-term appeal. The company spends around 8% of its sales on research, which should help it profit as developing countries like China raise more livestock for food. However, the stock trades at a high 22.0 times Zoetis’s forecast 2013 earnings of $1.41 a share. Zoetis pays a quarterly dividend of $0.065 a share, for a 0.8% annualized yield.
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3M COMPANY $110 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 690.2 million; Market cap: $75.9 billion; Priceto- sales ratio: 2.5; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.3m.com) makes over 55,000 consumer and industrial products.
The company plans to spend 6% of its revenue on research by 2017, up from 5.5% in 2012. That will slow 3M’s earnings growth, but it has a long history of developing successful new products. Right now, 34% of the company’s revenue comes from items it has launched in the past five years. The extra research spending should raise this figure to 40% by 2017.
3M is a buy.
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The company plans to spend 6% of its revenue on research by 2017, up from 5.5% in 2012. That will slow 3M’s earnings growth, but it has a long history of developing successful new products. Right now, 34% of the company’s revenue comes from items it has launched in the past five years. The extra research spending should raise this figure to 40% by 2017.
3M is a buy.
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HONDA MOTOR CO. LTD. ADRs $36 (New York symbol HMC; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.8 billion; Market cap: $64.8 billion; Price-to-sales ratio: 0.7; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.honda.com) sold 255,540 cars in China in the first five months of 2013. That’s down 2.4% from the same period a year earlier. Chinese consumers continue to boycott Japanese products because of a dispute between the two countries over several small islands in the East China Sea.
The company hopes to spur sales by launching 12 new models in China by 2015. These cars will have a number of new features, including better pollution control and safety equipment. In addition, Honda will move some of its research activities to China and buy more parts from local suppliers.
Honda is a buy.
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The company hopes to spur sales by launching 12 new models in China by 2015. These cars will have a number of new features, including better pollution control and safety equipment. In addition, Honda will move some of its research activities to China and buy more parts from local suppliers.
Honda is a buy.
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ARCHER DANIELS MIDLAND CO. $34 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 658.8 million; Market cap: $22.4 billion; Priceto- sales ratio: 0.2; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.adm.com) is looking to sell its cocoa business, which sells cocoa powder, cocoa butter and related ingredients to chocolate and confectionery makers. This operation accounts for about 4% of the company’s sales.
The cocoa business’s profits have suffered lately, because high inventories have depressed prices. Selling it would give Archer around $2 billion that it can put toward its upcoming $3.4-billion purchase of the remaining 80.2% of GrainCorp, a leading Australian grain-storage and shipping company.
Archer Daniels Midland is a buy....
The cocoa business’s profits have suffered lately, because high inventories have depressed prices. Selling it would give Archer around $2 billion that it can put toward its upcoming $3.4-billion purchase of the remaining 80.2% of GrainCorp, a leading Australian grain-storage and shipping company.
Archer Daniels Midland is a buy....
ALLIANT ENERGY CORP. $49 (New York symbol LNT; Income Portfolio, Utilities sector; Shares outstanding: 119.6 million; Market cap: $5.9 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.8%; TSINetwork Rating: Average; www.alliantenergy.com) sells electricity and natural gas to 1.4 million residential and business customers in Wisconsin, Iowa and Minnesota.
Like Ameren (see left), Alliant benefited from colder- than-normal winter weather. The company earned $79.3 million, or $0.72 a share, in the first quarter of 2013, up 45.5% from $54.5 million, or $0.50 a share, a year earlier. Revenue rose 12.3%, to $859.6 million from $765.7 million.
Recent rate hikes in Iowa will help offset lower rates in Wisconsin. That should push up Alliant’s earnings to $3.30 a share in 2013 from $3.05 in 2012. The stock trades at a reasonable 14.8 times that estimate. The $1.88 dividend yields 3.8%.
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Like Ameren (see left), Alliant benefited from colder- than-normal winter weather. The company earned $79.3 million, or $0.72 a share, in the first quarter of 2013, up 45.5% from $54.5 million, or $0.50 a share, a year earlier. Revenue rose 12.3%, to $859.6 million from $765.7 million.
Recent rate hikes in Iowa will help offset lower rates in Wisconsin. That should push up Alliant’s earnings to $3.30 a share in 2013 from $3.05 in 2012. The stock trades at a reasonable 14.8 times that estimate. The $1.88 dividend yields 3.8%.
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AMEREN CORP. $34 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 242.6 million; Market cap: $8.2 billion; Price-to-sales ratio: 1.2; Dividend yield: 4.7%; TSINetwork Rating: Average; www.ameren.com) sells power and natural gas to 3.3 million customers in Illinois and Missouri.
The company is selling its energy marketing business and five of its non-regulated coal-fired power plants in Illinois to Dynegy Inc. (New York symbol DYN). It aims to complete the sale in the fourth quarter of 2013.
Ameren’s unregulated power plants supply 20% of its revenue. However, power demand has fallen in Illinois, and Ameren is paying more to comply with stricter environmental regulations. That has cut these plants’profits.
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The company is selling its energy marketing business and five of its non-regulated coal-fired power plants in Illinois to Dynegy Inc. (New York symbol DYN). It aims to complete the sale in the fourth quarter of 2013.
Ameren’s unregulated power plants supply 20% of its revenue. However, power demand has fallen in Illinois, and Ameren is paying more to comply with stricter environmental regulations. That has cut these plants’profits.
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NCR CORP. $33 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 164.4 million; Market cap: $5.4 billion; Price-to-sales ratio: 0.9; No dividends paid; TSINetwork Rating: Average; www.ncr.com) is a leading maker of automated teller machines (ATMs), checkout scanners, cash registers and self-serve kiosks.
In February 2013, the company paid $791 million for Israel-based Retalix, whose software helps retailers manage their sales and track inventories. Retailers with a combined 70,000 locations in over 50 countries use Retalix’s products. NCR feels Retalix’s expertise will improve its point-of-sale terminals and self-serve kiosks.
In the three months ended March 31, 2013, Retalix contributed $50 million to NCR’s revenue. That helped push up the total by 13.3% in the latest quarter, to $1.4 billion from $1.2 billion a year earlier. The acquisition should add $255 million to the company’s full-year revenue.
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In February 2013, the company paid $791 million for Israel-based Retalix, whose software helps retailers manage their sales and track inventories. Retailers with a combined 70,000 locations in over 50 countries use Retalix’s products. NCR feels Retalix’s expertise will improve its point-of-sale terminals and self-serve kiosks.
In the three months ended March 31, 2013, Retalix contributed $50 million to NCR’s revenue. That helped push up the total by 13.3% in the latest quarter, to $1.4 billion from $1.2 billion a year earlier. The acquisition should add $255 million to the company’s full-year revenue.
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STANLEY BLACK & DECKER INC. $77 (New York symbol SWK; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 161.9 million; Market cap: $12.5 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.5%; TSINetwork Rating: Average; www.stanleyblackanddecker.com) earned $163.1 million in the first quarter of 2013, down 1.3% from $165.2 million a year earlier.
Due to fewer shares outstanding, earnings per share rose 5.1% to $1.03. These figures exclude costs to integrate its $826.4-million purchase of Infastech, a Hong Kong-based fastener maker that serves automotive, electronic, aerospace and construction clients. Infastech should add $0.20 a share to Stanley’s yearly earnings.
Sales rose 2.5%, to $2.5 billion from $2.4 billion. Infastech’s contribution offset weaker sales of tools and other products and the negative impact of exchange rates.
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Due to fewer shares outstanding, earnings per share rose 5.1% to $1.03. These figures exclude costs to integrate its $826.4-million purchase of Infastech, a Hong Kong-based fastener maker that serves automotive, electronic, aerospace and construction clients. Infastech should add $0.20 a share to Stanley’s yearly earnings.
Sales rose 2.5%, to $2.5 billion from $2.4 billion. Infastech’s contribution offset weaker sales of tools and other products and the negative impact of exchange rates.
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