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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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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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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