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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WINDSTREAM CORP. $8.25 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 592.8 million; Market cap: $4.9 billion; Price-to-sales ratio: 0.8; Dividend yield: 12.1%; TSINetwork Rating: Average; www.windstream.com) provides telephone and other communication services to 4.2 million clients, mainly in rural areas in the U.S.
In November 2011, Windstream bought PAETEC Holding Corp., which sells telecommunication services to businesses in 46 states. The company issued $842 million in stock to PAETEC shareholders and assumed $1.6 billion of PAETEC’s debt.
The deal raised Windstream’s long-term debt to $8.1 billion, or a high 1.7 times its market cap. It also added more business and high-speed Internet clients. These users now supply 71% of Windstream’s sales.
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In November 2011, Windstream bought PAETEC Holding Corp., which sells telecommunication services to businesses in 46 states. The company issued $842 million in stock to PAETEC shareholders and assumed $1.6 billion of PAETEC’s debt.
The deal raised Windstream’s long-term debt to $8.1 billion, or a high 1.7 times its market cap. It also added more business and high-speed Internet clients. These users now supply 71% of Windstream’s sales.
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GOOGLE INC. $868 (Nasdaq symbol GOOG; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 331.8 million; Market cap: $288.0 billion; Priceto- sales ratio: 5.5; No dividends paid; TSINetwork Rating: Above Average; www.google.com) now sells Internet and TV services through its own fibreoptic networks in Kansas City, Missouri, Austin, Texas, and Provo, Utah. Download speeds on these systems are up to 100 times faster than other broadband networks. Google will probably bring this service to more cities in the next few years.
The company is also working on new ways to expand Internet access in developing regions like Africa and Asia. It aims to team up with local telecom firms to build new high-speed wireless networks, possibly by using satellites or stationary balloons to transmit signals over long distances.
In addition, Google’s Motorola Mobility subsidiary is developing new low-cost mobile phones and tablet computers for emerging markets.
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The company is also working on new ways to expand Internet access in developing regions like Africa and Asia. It aims to team up with local telecom firms to build new high-speed wireless networks, possibly by using satellites or stationary balloons to transmit signals over long distances.
In addition, Google’s Motorola Mobility subsidiary is developing new low-cost mobile phones and tablet computers for emerging markets.
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VERIZON COMMUNICATIONS INC. $50 (New York symbol VZ, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $145.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 4.1%; TSINetwork Rating: Average; www.verizon.com) gets 66% of its revenue from its 98.9 million wireless subscribers in the U.S. It also has 22.2 million phone and Internet customers.
Wireless buyout would be expensive
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AT&T INC. $36 (New York symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 5.4 billion; Market cap: $194.4 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.0%; TSINetwork Rating: Average; www.att.com) is the largest wireless service provider in the U.S., with 107.3 million subscribers. This business supplies 53% of AT&T’s revenue and 74% of its earnings.
The wireline division, which sells phone services, television packages and high-speed Internet access to 37.4 million customers, accounts for most of AT&T’s remaining revenue and earnings.
Due to the recession and weaker demand for regular phone services, AT&T’s revenue fell slightly from $123.4 billion in 2008 to $122.5 billion in 2009. However, revenue turned around and climbed to $127.4 billion in 2012.
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The wireline division, which sells phone services, television packages and high-speed Internet access to 37.4 million customers, accounts for most of AT&T’s remaining revenue and earnings.
Due to the recession and weaker demand for regular phone services, AT&T’s revenue fell slightly from $123.4 billion in 2008 to $122.5 billion in 2009. However, revenue turned around and climbed to $127.4 billion in 2012.
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AASTRA TECHNOLOGIES $18.20 (Toronto symbol AAH; TSINetwork Rating: Speculative) (905-760- 4200; www.aastra.com; Shares outstanding: 11.6 million; Market cap: $208.7 million; Dividend yield: 4.4%) develops and markets products and systems for accessing communication networks, including the Internet. Its technology is centred around business telephone systems and includes products that integrate land lines and mobile phones.
In the three months ended March 31, 2013, the company’s sales fell 9.3%, to $133.5 million from $147.3 million a year earlier. Sales declined in most regions, especially Western Europe, where Aastra gets the majority of its revenue. Excluding the impact of foreign exchange rates, sales declined 10.4%. Earnings per share fell to $0.01 from $0.12.
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In the three months ended March 31, 2013, the company’s sales fell 9.3%, to $133.5 million from $147.3 million a year earlier. Sales declined in most regions, especially Western Europe, where Aastra gets the majority of its revenue. Excluding the impact of foreign exchange rates, sales declined 10.4%. Earnings per share fell to $0.01 from $0.12.
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CALIAN TECHNOLOGIES $20.35 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613- 599-8600; www.calian.com; Shares outstanding: 7.6 million; Market cap: $155.6 million; Dividend yield: 5.5%) operates in two areas: the business and technology services division (which supplies 70% of Calian’s revenue) provides engineers, health care workers and other skilled professionals to clients on a contract basis. The systems engineering division (30% of revenue) sells hardware and software for testing, operating and managing satellite and other communication systems.
In the three months ended March 31, 2013, Calian’s revenue fell 4.4%, to $58.9 million from $61.6 million a year earlier. Earnings declined 8.6%, to $3.4 million, or $0.44 a share, from $3.7 million, or $0.48 a share.
The business and technology services division continues to benefit from steady orders from various Canadian federal government departments, including the Department of National Defence. However, these clients placed fewer orders in the latest quarter, which pushed down the division’s revenue by 6%. That hurt Calian’s profit margins, which lowered its earnings.
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In the three months ended March 31, 2013, Calian’s revenue fell 4.4%, to $58.9 million from $61.6 million a year earlier. Earnings declined 8.6%, to $3.4 million, or $0.44 a share, from $3.7 million, or $0.48 a share.
The business and technology services division continues to benefit from steady orders from various Canadian federal government departments, including the Department of National Defence. However, these clients placed fewer orders in the latest quarter, which pushed down the division’s revenue by 6%. That hurt Calian’s profit margins, which lowered its earnings.
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WESTJET AIRLINES $23.45 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1- 877-493-7853; www.westjet.com; Shares outstanding: 132.3 million; Market cap: $3.1 billion; Dividend yield: 1.7%) recently dropped from the all-time high of $25.47 it reached in April 2013, even though the company reported record earnings in the latest quarter.
WestJet’s earnings per share jumped 38.8% in the three months ended March 31, 2013, to $0.68 from $0.49 a year earlier.
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 increases.
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WestJet’s earnings per share jumped 38.8% in the three months ended March 31, 2013, to $0.68 from $0.49 a year earlier.
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 increases.
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TOROMONT INDUSTRIES LTD. $23.32 (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: 2.2%) continues to report higher sales and earnings. In response, the company has raised its quarterly dividend by 8.3% with the April 2013 payment, to $0.13 a share from $0.12, for a 2.2% annualized yield.
The stock trades at 14.6 times Toromont’s forecast 2013 earnings of $1.60 a share.
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416-667- 5511; www.toromont.com; Shares outstanding: 76.6 million; Market cap: $1.8 billion; Dividend yield: 2.2%) continues to report higher sales and earnings. In response, the company has raised its quarterly dividend by 8.3% with the April 2013 payment, to $0.13 a share from $0.12, for a 2.2% annualized yield.
The stock trades at 14.6 times Toromont’s forecast 2013 earnings of $1.60 a share.
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MCCOY CORP. $4.80 (Toronto symbol MCB; TSINetwork Rating: Speculative) (780-453-8451; www.mccoyglobal.com; Shares outstanding: 26.7 million; Market cap: $124.7 million; Dividend yield: 4.2%) operates through two divisions: Mobile Solutions and Energy Products and Services.
Energy Products and Services sells hydraulic equipment for drilling rigs. This gear includes power tongs, which are large, wrench-like tools that tighten and loosen the pipe in the drill hole. Mobile Solutions builds heavy-duty trailers for U.S. and Canadian clients in the oil and gas, wind energy, infrastructure and construction industries.
In the three months ended March 31, 2013, McCoy’s revenue fell 7.7%, to $42.0 million from $45.5 million. Sales declines at the Mobile Services division offset gains at Energy Products and Services. Earnings fell 4.3%, to $2.1 million, or $0.08 a share, from $2.2 million, or $0.08.
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Energy Products and Services sells hydraulic equipment for drilling rigs. This gear includes power tongs, which are large, wrench-like tools that tighten and loosen the pipe in the drill hole. Mobile Solutions builds heavy-duty trailers for U.S. and Canadian clients in the oil and gas, wind energy, infrastructure and construction industries.
In the three months ended March 31, 2013, McCoy’s revenue fell 7.7%, to $42.0 million from $45.5 million. Sales declines at the Mobile Services division offset gains at Energy Products and Services. Earnings fell 4.3%, to $2.1 million, or $0.08 a share, from $2.2 million, or $0.08.
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SYMANTEC CORP. $23.62 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 689.2 million; Market cap: $16.7 billion; Dividend yield: 2.5%) sells computersecurity technology, including anti-virus and emailfiltering software, to businesses and consumers.
In its fiscal 2013 fourth quarter, which ended March 29, 2013, Symantec’s revenue rose 4.4%, to $1.75 billion from $1.68 billion a year earlier. Earnings per share rose 15.8%, to $0.44 from $0.38.
Symantec is laying off 30% to 40% of its managers and streamlining its product lines. This restructuring should increase its gross profit margin (gross profits as a percentage of revenue) from 25.7% in fiscal 2013 to at least 30% in fiscal 2015.
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In its fiscal 2013 fourth quarter, which ended March 29, 2013, Symantec’s revenue rose 4.4%, to $1.75 billion from $1.68 billion a year earlier. Earnings per share rose 15.8%, to $0.44 from $0.38.
Symantec is laying off 30% to 40% of its managers and streamlining its product lines. This restructuring should increase its gross profit margin (gross profits as a percentage of revenue) from 25.7% in fiscal 2013 to at least 30% in fiscal 2015.
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