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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AMAZON.COM $278.16 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206- 266-1000; www.amazon.com; Shares outstanding: 455.2 million; Market cap: $128.3 billion; No dividends paid) has invested heavily in cloud computing. This is now paying off with some big contracts: earlier this year, it won a $600-million deal with the U.S. Central Intelligence Agency to build a cloud-computing service.
The CIA has traditionally awarded many of its big computing contracts to IBM (New York symbol IBM), a recommendation of our Wall Street Stock Forecaster newsletter.
IBM has protested the awarding of this deal to Amazon, and the U.S. Government Accountability Office recently recommended that the CIA reopen negotiations. The CIA now has 60 days to say whether it will follow this recommendation.
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The CIA has traditionally awarded many of its big computing contracts to IBM (New York symbol IBM), a recommendation of our Wall Street Stock Forecaster newsletter.
IBM has protested the awarding of this deal to Amazon, and the U.S. Government Accountability Office recently recommended that the CIA reopen negotiations. The CIA now has 60 days to say whether it will follow this recommendation.
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FIRSTSERVICE CORP. $31.20 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 28.9 million; Market cap: $1.0 billion; No dividends paid) is expanding further into Western Europe through its Colliers International commercial real estate sales division. Colliers has just acquired controlling interests in two firms in Germany and one in the Netherlands. All are leaders in their respective markets.
European real estate markets have weakened along with the region’s economies, and now is a good time to make acquisitions.
FirstService is a hold....
European real estate markets have weakened along with the region’s economies, and now is a good time to make acquisitions.
FirstService is a hold....
BIRCHCLIFF ENERGY $8.34 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 142.2 million; Market cap: $1.2 billion; No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border.
In the three months ended March 31, 2013, the company produced an average of 26,108 barrels of oil equivalent a day (82% gas and 18% oil). That was up 24.0% from 21,061 barrels a year earlier. The production increase pushed up Birchcliff’s cash flow per share by 33.3%, to $0.28 from $0.21.
Last year, Birchcliff completed Phase III of its gas plant expansion in Pouce Coupe, Alberta. This project doubled the facility’s capacity and is helping the company bring the additional gas it is producing to market.
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In the three months ended March 31, 2013, the company produced an average of 26,108 barrels of oil equivalent a day (82% gas and 18% oil). That was up 24.0% from 21,061 barrels a year earlier. The production increase pushed up Birchcliff’s cash flow per share by 33.3%, to $0.28 from $0.21.
Last year, Birchcliff completed Phase III of its gas plant expansion in Pouce Coupe, Alberta. This project doubled the facility’s capacity and is helping the company bring the additional gas it is producing to market.
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WESTJET AIRLINES $22.46 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 121.9 million; Market cap: $3.0 billion; Dividend yield: 1.8%) reports that its load factor fell slightly in May 2013, to 78.5% from 79.2% a year earlier. Load factor is the percentage of available seats that are occupied by paying passengers.
However, the decline was only slight, even though the company increased its capacity by 9.1% to meet higher demand. Revenue passenger miles (the total number of paying passengers on each plane multiplied by the distance travelled in miles) rose 8.2% in the latest quarter.
Demand for the company’s flights remains high, and it has entered into new partnerships with other airlines; these were the main reasons for the increased number of passengers.
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However, the decline was only slight, even though the company increased its capacity by 9.1% to meet higher demand. Revenue passenger miles (the total number of paying passengers on each plane multiplied by the distance travelled in miles) rose 8.2% in the latest quarter.
Demand for the company’s flights remains high, and it has entered into new partnerships with other airlines; these were the main reasons for the increased number of passengers.
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WAJAX CORP. $32.54 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212- 3300; www.wajax.ca; Shares outstanding:16.7 million; Market cap: $528.7 million; Dividend yield: 7.4%) sells and services cranes, forklifts and other heavy equipment. It also sells related parts (such as bearings, motors, hoses and fittings) and power systems (including diesel engines and transmissions).
In the quarter ended March 31, 2013, Wajax’s revenue fell 6.1%, to $336.3 million from $358.1 million a year earlier. Earnings per share fell 39.8%, to $0.62 from $1.03.
The declines mostly came from reduced activity in the western Canadian oil and gas industry, which hurt results at Wajax’s power systems business. Lower mining equipment sales more than offset strength in the forestry and construction markets.
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In the quarter ended March 31, 2013, Wajax’s revenue fell 6.1%, to $336.3 million from $358.1 million a year earlier. Earnings per share fell 39.8%, to $0.62 from $1.03.
The declines mostly came from reduced activity in the western Canadian oil and gas industry, which hurt results at Wajax’s power systems business. Lower mining equipment sales more than offset strength in the forestry and construction markets.
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ENERFLEX LTD., $13.66 (Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 77.9 million; Market cap: $1.1 billion; Dividend yield: 2.1%) 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 production; 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 March 31, 2013, Enerflex’s revenue fell slightly, to $353.3 million from $355.7 million a year ago. Lower revenue in Canada and the northern U.S. offset increases from producers in the southern U.S., Latin America and overseas. Earnings per share rose 5.3%, to $0.20 from $0.19, due to improved profit margins.
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The company has a strong position in three expanding markets: U.S. and Canadian shale gas production; 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 March 31, 2013, Enerflex’s revenue fell slightly, to $353.3 million from $355.7 million a year ago. Lower revenue in Canada and the northern U.S. offset increases from producers in the southern U.S., Latin America and overseas. Earnings per share rose 5.3%, to $0.20 from $0.19, due to improved profit margins.
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TOROMONT INDUSTRIES LTD. $22.58 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 76.6 million; Market cap: $1.7 billion; Dividend yield: 2.3%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. Toromont also makes refrigeration systems through its CIMCO division.
The company completed the spinoff of Enerflex Ltd. (see below) in July 2011. Shareholders received shares of the new Toromont and shares of Enerflex.
In the three months ended March 31, 2013, higher equipment sales and rentals, particularly to mining customers, pushed up Toromont’s revenue by 11.3%, to $313.1 million from $281.5 million a year earlier.
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The company completed the spinoff of Enerflex Ltd. (see below) in July 2011. Shareholders received shares of the new Toromont and shares of Enerflex.
In the three months ended March 31, 2013, higher equipment sales and rentals, particularly to mining customers, pushed up Toromont’s revenue by 11.3%, to $313.1 million from $281.5 million a year earlier.
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COMPUTER MODELLING GROUP $23.05 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 38.2 million; Market cap: $887.4 million; Dividend yield: 3.1%) reported revenue of $19.3 million in the three months ended March 31, 2013. That’s up 12.0% from $17.2 million a year earlier.
Earnings rose 9.6%, to $7.3 million from $6.6 million. Per-share earnings rose 5.6%, to $0.19 from $0.18, on more shares outstanding.
Computer Modelling holds cash of $59.4 million, or $1.56 a share, and has no debt. It spent $3.5 million, or a high 18.0% of its revenue, on research and development in the latest quarter.
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Earnings rose 9.6%, to $7.3 million from $6.6 million. Per-share earnings rose 5.6%, to $0.19 from $0.18, on more shares outstanding.
Computer Modelling holds cash of $59.4 million, or $1.56 a share, and has no debt. It spent $3.5 million, or a high 18.0% of its revenue, on research and development in the latest quarter.
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CIMAREX ENERGY $71.16 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 86.5 million; Market cap: $6.3 billion; Dividend yield: 0.8%) produces and explores for natural gas and oil. Gas makes up 49% of its output.
Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (55% of production); the Permian Basin of western Texas and southeastern New Mexico (42%); and the Texas Gulf Coast (3%).
In the three months ended March 31, 2013, Cimarex’s production averaged 661.1 million cubic feet of natural gas equivalent per day (including oil). That’s up 9.5% from 603.5 million cubic feet a year earlier. Thanks to the higher production, Cimarex’s cash flow per share fell just 4.2%, to $3.38 from $3.53, despite lower oil prices.
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Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (55% of production); the Permian Basin of western Texas and southeastern New Mexico (42%); and the Texas Gulf Coast (3%).
In the three months ended March 31, 2013, Cimarex’s production averaged 661.1 million cubic feet of natural gas equivalent per day (including oil). That’s up 9.5% from 603.5 million cubic feet a year earlier. Thanks to the higher production, Cimarex’s cash flow per share fell just 4.2%, to $3.38 from $3.53, despite lower oil prices.
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DEVON ENERGY CORP. $54.13 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 406.0 million; Market cap: $22.5 billion; Dividend yield: 1.6%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 59% gas and 41% oil.
In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.
Devon has formed joint ventures to cut the risk of its big development projects. Last year, it sold a onethird stake in five shale oil and gas fields to giant Chinese state-owned petroleum and chemical company Sinopec for $2.2 billion. As well, Japan’s Sumitomo Corp. bought 30% of the Cline and Wolfcamp shales in Texas for $1.4 billion.
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In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.
Devon has formed joint ventures to cut the risk of its big development projects. Last year, it sold a onethird stake in five shale oil and gas fields to giant Chinese state-owned petroleum and chemical company Sinopec for $2.2 billion. As well, Japan’s Sumitomo Corp. bought 30% of the Cline and Wolfcamp shales in Texas for $1.4 billion.
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