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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BAXTER INTERNATIONAL INC. $71 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 542.0 million; Market cap: $38.5 billion; Price-to-sales ratio: 2.8; Dividend yield: 2.8%; TSINetwork Rating: Average; www.baxter.com) makes medical products, such as intravenous pumps and kidney dialysis equipment. It also produces vaccines and drugs.
The company has agreed to pay $4.0 billion for Gambro AB, a privately held Swedish company that makes dialysis products. It should complete the purchase in the next few weeks. If you exclude acquisition- related costs and other unusual items, Baxter would have earned $581 million in the quarter ended March 31, 2013. That’s up 2.1% from $569 million a year earlier. Due to fewer shares outstanding, pershare earnings rose 4.0%, to $1.05 from $1.01. Sales rose 1.8%, to $3.45 billion from $3.39 billion.
The company spent $246 million (or 7.1% of its sales) on research in the latest quarter. That’s down 8.6% from $269 million (or 7.9% of sales) a year earlier. Baxter recently teamed up with another firm to develop certain products, which lowered its research costs.
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The company has agreed to pay $4.0 billion for Gambro AB, a privately held Swedish company that makes dialysis products. It should complete the purchase in the next few weeks. If you exclude acquisition- related costs and other unusual items, Baxter would have earned $581 million in the quarter ended March 31, 2013. That’s up 2.1% from $569 million a year earlier. Due to fewer shares outstanding, pershare earnings rose 4.0%, to $1.05 from $1.01. Sales rose 1.8%, to $3.45 billion from $3.39 billion.
The company spent $246 million (or 7.1% of its sales) on research in the latest quarter. That’s down 8.6% from $269 million (or 7.9% of sales) a year earlier. Baxter recently teamed up with another firm to develop certain products, which lowered its research costs.
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NVIDIA CORP. $14 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 577.9 million; Market cap: $8.1 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.1%; TSINetwork Rating: Average; www.nvidia .com) continues to benefit from strong demand for its new graphic chips, which make computer games run more smoothly.
In the quarter ended April 28, 2013, Nvidia’s sales rose 3.2%, to $954.7 million from $924.9 million a year earlier. The higher sales pushed up earnings by 12.5%, to $0.18 a share from $0.16. The company continues to spend a high 34% of its revenue on research, but its sales of chips for mobile devices have slowed while buyers wait for it to launch new models later this year. The company also faces growing competition from larger chipmakers.
Nvidia is a hold....
In the quarter ended April 28, 2013, Nvidia’s sales rose 3.2%, to $954.7 million from $924.9 million a year earlier. The higher sales pushed up earnings by 12.5%, to $0.18 a share from $0.16. The company continues to spend a high 34% of its revenue on research, but its sales of chips for mobile devices have slowed while buyers wait for it to launch new models later this year. The company also faces growing competition from larger chipmakers.
Nvidia is a hold....
TERADATA CORP. $55 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 163.4 million; Market cap: $9.0 billion; Price-to-sales ratio: 3.4; No dividends paid; TSINetwork Rating: Average; www.teradata.com) makes computers and software that capture and store large amounts of a business’s data, including its sales and inventory. It then analyzes this information and identifies buying habits and trends, which helps its clients make better decisions. Teradata was a wholly owned subsidiary of NCR Corp. until October 1, 2007.
The slow economy is prompting businesses to cut spending on computer systems. That’s why Teradata’s revenue fell 4.2% in the first quarter of 2013, to $587 million from $613 million a year earlier. Earnings declined 29.1%, to $73 million, or $0.43 a share, from $103 million, or $0.60. Teradata spent 8.5% of its revenue on research in the latest quarter.
The company gets roughly half of its revenue from outside the U.S., and unfavourable foreign currency rates will probably hold back its sales this year. The stock trades at 19.7 times the $2.79 a share that Teradata will probably earn in 2013.
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The slow economy is prompting businesses to cut spending on computer systems. That’s why Teradata’s revenue fell 4.2% in the first quarter of 2013, to $587 million from $613 million a year earlier. Earnings declined 29.1%, to $73 million, or $0.43 a share, from $103 million, or $0.60. Teradata spent 8.5% of its revenue on research in the latest quarter.
The company gets roughly half of its revenue from outside the U.S., and unfavourable foreign currency rates will probably hold back its sales this year. The stock trades at 19.7 times the $2.79 a share that Teradata will probably earn in 2013.
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AGILENT TECHNOLOGIES INC. $46 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 345.0 million; Market cap: $15.9 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.0%; TSINetwork Rating: Average; 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.
Agilent earned $269 million in its fiscal 2013 second quarter, which ended April 30, 2013. That’s down 2.2% from $275 million a year earlier. Due to fewer shares outstanding, earnings per share fell 1.3%, to $0.77 from $0.78.
Revenue was flat at $1.7 billion. Mobile phone makers bought less testing equipment. However, medical equipment sales benefited from last year’s $2.2- billion purchase of Dako, a Denmark-based firm whose products detect cancer.
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Agilent earned $269 million in its fiscal 2013 second quarter, which ended April 30, 2013. That’s down 2.2% from $275 million a year earlier. Due to fewer shares outstanding, earnings per share fell 1.3%, to $0.77 from $0.78.
Revenue was flat at $1.7 billion. Mobile phone makers bought less testing equipment. However, medical equipment sales benefited from last year’s $2.2- billion purchase of Dako, a Denmark-based firm whose products detect cancer.
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INTERNATIONAL FLAVORS & FRAGRANCES INC. $82 (New York symbol IFF; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $6.7 billion; Priceto- sales ratio: 2.4; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.iff.com) produces compounds that improve the taste of food and make consumer products smell better.
The company continues to expand in fast-growing markets like China, India and Turkey. Strong sales in these countries increased IFF’s overall sales by 2.4% in the quarter ended March 31, 2013, to $727.8 million from $710.6 million a year earlier. If you disregard unfavourable exchange rates and products that IFF has discontinued, sales would have risen 4%. The higher sales pushed up per-share earnings by 19.0%, to $1.19 from $1.00.
IFF is a buy.
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The company continues to expand in fast-growing markets like China, India and Turkey. Strong sales in these countries increased IFF’s overall sales by 2.4% in the quarter ended March 31, 2013, to $727.8 million from $710.6 million a year earlier. If you disregard unfavourable exchange rates and products that IFF has discontinued, sales would have risen 4%. The higher sales pushed up per-share earnings by 19.0%, to $1.19 from $1.00.
IFF is a buy.
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FRONTIER COMMUNICATIONS CORP. $4.25 (Nasdaq symbol FTR; Income Portfolio, Utilities sector; Shares outstanding: 997.8 million; Market cap: $4.2 billion; Price-to-sales ratio: 0.9; Dividend yield: 9.4%; TSINetwork Rating: Average; www.frontier.com) sells phone, Internet and video services to 3.1 million customers in 27 states.
The company continues to attract high-speed Internet users, but demand for traditional phone services is falling. That cut its overall revenue by 4.9% in the quarter ended March 31, 2013, to $1.2 billion from $1.3 billion a year earlier. Earnings fell 7.0% to $48.8 million from $52.5 million. Due to more shares outstanding, earnings per share were unchanged at $0.05.
Frontier continues to do a good job of integrating local phone systems it purchased from Verizon in 2010. It feels this will save it $100 million in 2013. That should help it pay down its debt of $8.4 billion, which is a high 2.0 times its market cap.
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The company continues to attract high-speed Internet users, but demand for traditional phone services is falling. That cut its overall revenue by 4.9% in the quarter ended March 31, 2013, to $1.2 billion from $1.3 billion a year earlier. Earnings fell 7.0% to $48.8 million from $52.5 million. Due to more shares outstanding, earnings per share were unchanged at $0.05.
Frontier continues to do a good job of integrating local phone systems it purchased from Verizon in 2010. It feels this will save it $100 million in 2013. That should help it pay down its debt of $8.4 billion, which is a high 2.0 times its market cap.
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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.
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Wireless buyout would be expensive
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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