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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TEXAS INSTRUMENTS INC. $35 (Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $38.5 billion; Price-to-sales ratio: 3.2; Dividend yield: 3.2%; TSINetwork Rating: Average; www.ti.com) continues to benefit from its focus on analog chips, which convert inputs like touch, sound and pressure into electronic signals. Carmakers and other industrial clients continue to buy more of these chips from the company. However, its sales to makers of computers and video game consoles remain weak.
The company recently said that it expects revenue of $2.99 billion to $3.11 billion in the second quarter of 2013. The midpoint of that range— $3.05 billion— missed the consensus estimate of $3.06 billion. The company also expects earnings of $0.39 to $0.43 a share. The midpoint of $0.41 matched the consensus forecast.
Texas Instruments is a hold....
The company recently said that it expects revenue of $2.99 billion to $3.11 billion in the second quarter of 2013. The midpoint of that range— $3.05 billion— missed the consensus estimate of $3.06 billion. The company also expects earnings of $0.39 to $0.43 a share. The midpoint of $0.41 matched the consensus forecast.
Texas Instruments is a hold....
ENCANA CORP. $17 (New York symbol ECA;Conservative Growth Portfolio, Resources sector;Shares outstanding: 735.5 million; Market cap: $12.5billion; Price-to-sales ratio: 2.9; Dividend yield: 4.7%;TSINetwork Rating: Average; www.encana.com) is amajor North American natural gas producer that isincreasing its oil output.
In the quarter ended March 31, 2013, Encana’s oilproduction rose 48.5%, to 43,500 barrels a day from29,300 a year earlier. Encana expects to increase its oilproduction to 70,000 to 75,000 barrels a day by theend of 2013. It sold some of its U.S. gas properties in2012, so gas production fell 12.1% in the quarter. Gasstill accounted for 92% of Encana’s output.
Due to lower oil and gas prices, Encana’s earningsfell 25.4%, to $179 million from $240 million a yearearlier. Earnings per share declined 27.3%, to $0.24from $0.33, on slightly fewer shares outstanding.These figures exclude several unusual items, particularlygains related to hedging. Cash flow per share fell43.2%, to $0.79 from $1.39. Revenue declined 41.1%,to $1.1 billion from $1.8 billion.
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In the quarter ended March 31, 2013, Encana’s oilproduction rose 48.5%, to 43,500 barrels a day from29,300 a year earlier. Encana expects to increase its oilproduction to 70,000 to 75,000 barrels a day by theend of 2013. It sold some of its U.S. gas properties in2012, so gas production fell 12.1% in the quarter. Gasstill accounted for 92% of Encana’s output.
Due to lower oil and gas prices, Encana’s earningsfell 25.4%, to $179 million from $240 million a yearearlier. Earnings per share declined 27.3%, to $0.24from $0.33, on slightly fewer shares outstanding.These figures exclude several unusual items, particularlygains related to hedging. Cash flow per share fell43.2%, to $0.79 from $1.39. Revenue declined 41.1%,to $1.1 billion from $1.8 billion.
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CENOVUS ENERGY INC.$28 (New York symbol CVE;Conservative Growth Portfolio,Resources sector; Sharesoutstanding: 755.6 million;Market cap: $21.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.3%; TSINetworkRating: Average; www.cenovus.com) gets half itsoutput from the western Canadian oil sands.Conventional oil and gas wells supply the other half.
U.S.-based Phillips 66 (New York symbol PSX)owns 50% of Cenovus’s main Foster Creek and ChristinaLake oil sands projects in Alberta. These assetsproduce heavy bitumen, which Cenovus ships to its50%-owned refineries in Illinois and Texas. Phillips 66owns the other 50% of these operations.
In the first three months of 2013, Cenovus produced271,100 barrels of oil equivalent a day (66% oil and34% gas), up 3.1% from 262,900 barrels a year earlier.However, lower oil prices cut Cenovus’s revenueby 5.4%, to $4.3 billion from $4.6 billion a year earlier(all amounts except share price and market cap inCanadian dollars).
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U.S.-based Phillips 66 (New York symbol PSX)owns 50% of Cenovus’s main Foster Creek and ChristinaLake oil sands projects in Alberta. These assetsproduce heavy bitumen, which Cenovus ships to its50%-owned refineries in Illinois and Texas. Phillips 66owns the other 50% of these operations.
In the first three months of 2013, Cenovus produced271,100 barrels of oil equivalent a day (66% oil and34% gas), up 3.1% from 262,900 barrels a year earlier.However, lower oil prices cut Cenovus’s revenueby 5.4%, to $4.3 billion from $4.6 billion a year earlier(all amounts except share price and market cap inCanadian dollars).
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APACHE CORP. $83 (New York symbol APA;Aggressive Growth Portfolio, Resources sector;Shares outstanding: 391.9 million; Market cap: $32.5billion; Price-to-sales ratio: 2.0; Dividend yield: 1.0%;TSINetwork Rating: Average; www.apachecorp.com)produces oil and gas in the U.S., Canada, the U.K.,Australia, Egypt and Argentina.
The company plans to sell some of its less importantproperties this year, including its offshore oil and gasholdings in the Gulf of Mexico. Offshore drilling ismuch riskier than Apache’s onshore operations. In addition,the 2010 sinking of the Deepwater Horizon rigand the resulting oil spill led to new safety rules thathave raised Apache’s costs.
As well, political uncertainty in Egypt will likelyprompt Apache to try to sell its gas operations there.Egypt supplies 20% of Apache’s gas output.
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The company plans to sell some of its less importantproperties this year, including its offshore oil and gasholdings in the Gulf of Mexico. Offshore drilling ismuch riskier than Apache’s onshore operations. In addition,the 2010 sinking of the Deepwater Horizon rigand the resulting oil spill led to new safety rules thathave raised Apache’s costs.
As well, political uncertainty in Egypt will likelyprompt Apache to try to sell its gas operations there.Egypt supplies 20% of Apache’s gas output.
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CHEVRON CORP. $118 (New York symbol CVX;Conservative Growth Portfolio, Resources sector;Shares outstanding: 1.9 billion; Market cap: $224.2billion; Price-to-sales ratio: 1.0; Dividend yield: 3.4%;TSINetwork Rating: Above Average; www.chevron.com) is the second-largest integrated oilcompany in the U.S. after ExxonMobil.
Chevron continues to make progress on two bigAustralian projects. The first is its 47.3%-owned Gorgonnatural gas development off the country’s westcoast. Gorgon, which includes afacility to liquefy gas for shipping,is now 60% complete and shouldstart producing in 2015. Chevron’sshare of Gorgon’s $52-billioncost is $24.6 billion. Its reserveswill last 40 years.
Another big Australian projectis Chevron’s 64.14%-ownedWheatstone LNG facility on thecountry’s west coast. An offshoreoil field will supply 80% of thegas for this plant; Chevron owns80.17% of the joint venture thatwill build and operate the platformsand supply lines. Thisproject is 10% complete andshould start up in 2016. Wheatstone’sreserves should last 30years. Chevron’s share of the $29-billion cost is $18.6billion.
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Chevron continues to make progress on two bigAustralian projects. The first is its 47.3%-owned Gorgonnatural gas development off the country’s westcoast. Gorgon, which includes afacility to liquefy gas for shipping,is now 60% complete and shouldstart producing in 2015. Chevron’sshare of Gorgon’s $52-billioncost is $24.6 billion. Its reserveswill last 40 years.
Another big Australian projectis Chevron’s 64.14%-ownedWheatstone LNG facility on thecountry’s west coast. An offshoreoil field will supply 80% of thegas for this plant; Chevron owns80.17% of the joint venture thatwill build and operate the platformsand supply lines. Thisproject is 10% complete andshould start up in 2016. Wheatstone’sreserves should last 30years. Chevron’s share of the $29-billion cost is $18.6billion.
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MONSANTO CO. $101 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 533.8 million; Market cap: $53.9 billion; Price-to-sales ratio: 3.7; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.monsanto.com) reported that its sales in the three months ended May 31, 2013 rose 0.7%, to $4.25 billion from $4.22 billion a year earlier.
Sales of genetically modified seeds (72% of total sales) fell 2.4% on weaker demand for its soybean and cotton seeds. However, sales at the Agricultural Productivity division (28%) rose 9.4% due to higher selling prices for its Roundup weed killer.
Due to higher costs to make its seeds, earnings in the quarter fell 3.4%, to $1.68 a share from $1.74 a year earlier. If you exclude a one-time tax charge, earnings per share rose 1.8%, to $1.66 from $1.63.
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Sales of genetically modified seeds (72% of total sales) fell 2.4% on weaker demand for its soybean and cotton seeds. However, sales at the Agricultural Productivity division (28%) rose 9.4% due to higher selling prices for its Roundup weed killer.
Due to higher costs to make its seeds, earnings in the quarter fell 3.4%, to $1.68 a share from $1.74 a year earlier. If you exclude a one-time tax charge, earnings per share rose 1.8%, to $1.66 from $1.63.
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WAL-MART STORES INC. $75 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.3 billion; Market cap: $247.5 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.walmart.com) is the world’s largest retailer. It has 10,800 stores in the U.S. and 26 other countries, including over 3,150 supercentres, which sell groceries as well as general merchandise. Groceries now account for 55% of Wal-Mart’s U.S. sales. Offering groceries helps encourage repeat visits.
Wal-Mart uses its large size to negotiate better prices with its suppliers. That gives it a big advantage over its competitors. The company has also invested heavily in computer systems that track its customers’ buying patterns. This information helps Wal-Mart quickly adjust its inventories to respond to changing trends.
The company’s sales rose 15.7%, from $405.6 billion in 2009 to $469.2 billion in 2013 (Wal-Mart’s fiscal year ends January 31). Earnings rose 25.8%, from $13.5 billion in 2008 to $17.0 billion in 2013. Earnings per share jumped 46.8%, from $3.42 to $5.02, on fewer shares outstanding.
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Wal-Mart uses its large size to negotiate better prices with its suppliers. That gives it a big advantage over its competitors. The company has also invested heavily in computer systems that track its customers’ buying patterns. This information helps Wal-Mart quickly adjust its inventories to respond to changing trends.
The company’s sales rose 15.7%, from $405.6 billion in 2009 to $469.2 billion in 2013 (Wal-Mart’s fiscal year ends January 31). Earnings rose 25.8%, from $13.5 billion in 2008 to $17.0 billion in 2013. Earnings per share jumped 46.8%, from $3.42 to $5.02, on fewer shares outstanding.
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Agilent is up 9.5% since it was spun off from its parent company 14 years ago. We take a look at the outlook for this tech stock which bases its growth on an aggressive acquisition strategy. AGILENT TECHNOLOGIES INC. (New York symbol A; www.agilent.com) makes testing systems that help electronics firms improve their products. It also manufactures testing gear for medical research labs. Agilent was a unit of Hewlett-Packard until 1999, when Hewlett spun it off as a separate firm....
TEMPUR-PEDIC $44.72 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempurpedic.com; Shares outstanding: 60.3 million; Market cap: $2.8 billion; No dividends paid) is changing its name to Tempur Sealy International. Its stock will continue to trade under the TPX symbol.
Tempur-Pedic completed its $1.3-billion purchase of rival Sealy Corp. in March 2013. This was a major acquisition for Tempur-Pedic, but it lets the company diversify into the market for traditional spring-coil beds. That should help it offset rising competition in its current business.
The company makes and distributes Swedish mattresses and neck pillows made from its proprietary Tempur material, which conforms to the body to provide support and help alleviate pressure points. Simmons Bedding Co. and Serta Inc. have both successfully launched memory-foam mattresses that directly compete with Tempur-Pedic’s products.
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Tempur-Pedic completed its $1.3-billion purchase of rival Sealy Corp. in March 2013. This was a major acquisition for Tempur-Pedic, but it lets the company diversify into the market for traditional spring-coil beds. That should help it offset rising competition in its current business.
The company makes and distributes Swedish mattresses and neck pillows made from its proprietary Tempur material, which conforms to the body to provide support and help alleviate pressure points. Simmons Bedding Co. and Serta Inc. have both successfully launched memory-foam mattresses that directly compete with Tempur-Pedic’s products.
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INTUITIVE SURGICAL $510 (Nasdaq symbol ISRG; TSINetwork Rating: Average) (515-507-5000; www.intuitivesurgical.com; Shares outstanding: 40.2 million; Market cap: $20.5 billion; No dividends paid) makes the da Vinci, a computerized surgical system.
Guided by a miniature camera connected to a 3-D monitor, surgeons use the da Vinci to operate by remotely manipulating tiny robotic arms. This process is safer and much less invasive than regular surgery. It helps cut patient recovery time and post-operative discomfort. It also reduces scarring and infection risk.
In the three months ended March 31, 2013, Intuitive earned $188.9 million, or $4.56 a share. That’s up 31.6% from $143.5 million, or $3.50 a share, a year earlier. Revenue rose 23.5%, to $611.4 million from $495.2 million. Intuitive is debt-free and holds cash of $3.1 billion, or $77.51 a share.
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Guided by a miniature camera connected to a 3-D monitor, surgeons use the da Vinci to operate by remotely manipulating tiny robotic arms. This process is safer and much less invasive than regular surgery. It helps cut patient recovery time and post-operative discomfort. It also reduces scarring and infection risk.
In the three months ended March 31, 2013, Intuitive earned $188.9 million, or $4.56 a share. That’s up 31.6% from $143.5 million, or $3.50 a share, a year earlier. Revenue rose 23.5%, to $611.4 million from $495.2 million. Intuitive is debt-free and holds cash of $3.1 billion, or $77.51 a share.
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