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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GOODYEAR TIRE & RUBBER CO. $12.02 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 245.5 million; Market cap: $3.0 billion; No dividends paid) is the world’s largest tire maker, with 52 plants in 22 countries.
In the quarter ended December 31, 2012, the weak global economy lowered Goodyear’s sales by 11.2%, to $5.05 billion from $5.68 billion a year earlier.
North American sales fell 10.4%, to $2.31 billion from $2.58 billion. As well, sales declined by 9.2% in Latin America; 16.2% in Europe, the Middle East and Africa; and 0.5% in Asia. Unfavourable foreign currency moves also lowered Goodyear’s revenue.
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In the quarter ended December 31, 2012, the weak global economy lowered Goodyear’s sales by 11.2%, to $5.05 billion from $5.68 billion a year earlier.
North American sales fell 10.4%, to $2.31 billion from $2.58 billion. As well, sales declined by 9.2% in Latin America; 16.2% in Europe, the Middle East and Africa; and 0.5% in Asia. Unfavourable foreign currency moves also lowered Goodyear’s revenue.
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CARFINCO FINANCIAL GROUP $9.32 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888-486-4356; www.carfinco.com; Shares outstanding: 24.6 million; Market cap: $229.3 million; Dividend yield: 5.2%) provides car loans to consumers who don’t meet the criteria of traditional lenders, like banks.
In the three months ended December 31, 2012, Carfinco’s revenue rose 16.1%, to $19.2 million from $16.5 million a year earlier. The company loaned $40.1 million in the quarter, up 24.4% from $32.2 million.
Earnings rose 13.6%, to $5.0 million, or $0.21 a share, from $4.4 million, or $0.18 a share.
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In the three months ended December 31, 2012, Carfinco’s revenue rose 16.1%, to $19.2 million from $16.5 million a year earlier. The company loaned $40.1 million in the quarter, up 24.4% from $32.2 million.
Earnings rose 13.6%, to $5.0 million, or $0.21 a share, from $4.4 million, or $0.18 a share.
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ZARGON OIL & GAS $6.44 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 29.9 million; Market cap: $192.6 million; Dividend yield: 11.2%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. The company’s output is 67% oil and 33% natural gas.
In the three months ended December 31, 2012, Zargon produced 7,720 barrels of oil equivalent per day, down 17.0% from 9,278 barrels a year earlier. That’s because the company sold some less important properties and cut back on natural gas drilling in light of low gas prices. The production drop pushed down Zargon’s cash flow per share by 5.2%, to $0.55 from $0.58 a year earlier.
The company expects cash flow of $1.89 a share in 2013. It trades at 3.4 times that estimate.
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In the three months ended December 31, 2012, Zargon produced 7,720 barrels of oil equivalent per day, down 17.0% from 9,278 barrels a year earlier. That’s because the company sold some less important properties and cut back on natural gas drilling in light of low gas prices. The production drop pushed down Zargon’s cash flow per share by 5.2%, to $0.55 from $0.58 a year earlier.
The company expects cash flow of $1.89 a share in 2013. It trades at 3.4 times that estimate.
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LEON’S FURNITURE LTD. $12.66 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243- 7880; www.leons.ca; Shares outstanding: 70.6 million; Market cap: $893.8 million; Dividend yield: 3.2%) has received notice that the Canadian Commissioner of Competition will not challenge the company’s $700-million acquisition of The Brick (symbol BRK on Toronto) before the Competition Tribunal. Brick shareholders have already approved the takeover.
Leon’s is still a buy.
Leon’s is still a buy.
ADOBE SYSTEMS $44.90 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 495.1 million; Market cap: $22.2 billion; No dividends paid) reports that its earnings excluding one-time items fell 37.5% in its fiscal 2013 first quarter, which ended March 1, 2013, to $177.9 million, or $0.35 a share. A year earlier, it earned $284.5 million, or $0.57 a share. Revenue declined 3.6%, to $1.01 billion from $1.05 billion.
Adobe is doing a good job of selling its Creative Cloud package of photo-editing and desktoppublishing programs as a subscription service instead of a one-time purchase. The company added 153,000 Creative Cloud subscribers during the quarter, to bring its total to 479,000.
As a result, its subscription revenue jumped 53.4% from a year earlier and now accounts for 22% of its overall revenue. Adobe still gets 67% of its revenue from direct software sales. Services and support supply the remaining 11%.
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Adobe is doing a good job of selling its Creative Cloud package of photo-editing and desktoppublishing programs as a subscription service instead of a one-time purchase. The company added 153,000 Creative Cloud subscribers during the quarter, to bring its total to 479,000.
As a result, its subscription revenue jumped 53.4% from a year earlier and now accounts for 22% of its overall revenue. Adobe still gets 67% of its revenue from direct software sales. Services and support supply the remaining 11%.
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FIRSTSERVICE CORP. $33.92 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 28.8 million; Market cap: $976.9 million; No dividends paid) serves the following areas of the real estate market: commercial real estate, residential property management and property improvement. FirstService has more than 23,000 employees worldwide.
In the three months ended December 31, 2012, the company’s revenue rose 6.3%, to $632.5 million from $594.9 million a year earlier (all figures except share prices in U.S. dollars). Excluding one-time items, earnings per share jumped 30.8%, to $0.68 from $0.52.
Revenue rose at two of FirstService’s three divisions: commercial real estate (up 23%) and residential property management (up 10%).
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In the three months ended December 31, 2012, the company’s revenue rose 6.3%, to $632.5 million from $594.9 million a year earlier (all figures except share prices in U.S. dollars). Excluding one-time items, earnings per share jumped 30.8%, to $0.68 from $0.52.
Revenue rose at two of FirstService’s three divisions: commercial real estate (up 23%) and residential property management (up 10%).
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trong>AIMIA INC. $15.40 (Toronto symbol AIM; TSINetwork Rating: Extra Risk) (514-205-7315; www.aimia.com; Shares outstanding: 172.3 million; Market cap: $2.7 billion; Dividend yield: 4.2%) is buying the 25% of Nectar Italia that it doesn’t already own for $9 million.
The Nectar Italia loyalty program has signed up over 9.5 million members since its launch in March 2010. Its partners include a range of Italian retailers and participating shopping websites. As well, Nectar offers a credit card that lets holders earn points.
Aimia continues to diversify its operations geographically. That’s offsetting the risk of its Canadian business: Air Canada, a major Aeroplan partner, is vulnerable to labour disputes that can disrupt its service.
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The Nectar Italia loyalty program has signed up over 9.5 million members since its launch in March 2010. Its partners include a range of Italian retailers and participating shopping websites. As well, Nectar offers a credit card that lets holders earn points.
Aimia continues to diversify its operations geographically. That’s offsetting the risk of its Canadian business: Air Canada, a major Aeroplan partner, is vulnerable to labour disputes that can disrupt its service.
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ALARMFORCE INDUSTRIES $10.54 (Toronto symbol AF; TSINetwork Rating: Speculative) (1-800- 267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $128.6 million; Dividend yield: 0.9%) sells twoway voice alarm systems and monitoring services in Canada and increasingly in the U.S. It’s also adding to its prospects with its VideoRelay system, which it launched in October 2011.
In the three months ended January 31, 2013, AlarmForce’s sales rose 9.1%, to $11.9 million from $10.9 million a year earlier. Earnings almost doubled, to $1.4 million, or $0.11 a share, from $699,000, or $0.06.
AlarmForce’s revenue rose along with its subscriber base. Earnings were sharply higher because the company spent a lot less on marketing than in the yearearlier quarter, when it increased its advertising spending as it expanded into the U.S.
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In the three months ended January 31, 2013, AlarmForce’s sales rose 9.1%, to $11.9 million from $10.9 million a year earlier. Earnings almost doubled, to $1.4 million, or $0.11 a share, from $699,000, or $0.06.
AlarmForce’s revenue rose along with its subscriber base. Earnings were sharply higher because the company spent a lot less on marketing than in the yearearlier quarter, when it increased its advertising spending as it expanded into the U.S.
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BIRCHCLIFF ENERGY $7.96 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy. com; Units outstanding: 141.8 million; Market cap: $1.1 billion; No dividends paid) produced an average of 26,655 barrels of oil equivalent a day (82% natural gas and 18% oil) in the quarter ended December 31, 2013. That was up 34.5% from 19,812 barrels a year earlier.
The production increase pushed up Birchcliff’s cash flow per share by 16.7%, to $0.28 from $0.24 a year earlier.
The stock trades at 7.1 times the company’s annual cash flow, based on the latest quarter.
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The production increase pushed up Birchcliff’s cash flow per share by 16.7%, to $0.28 from $0.24 a year earlier.
The stock trades at 7.1 times the company’s annual cash flow, based on the latest quarter.
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IMPERIAL METALS $11.27 (Toronto symbol III; TSINetwork Rating: Speculative) (604-669-8959; www.imperialmetals.com; Shares outstanding: 74.4 million; Market cap: $838.5 million) is a Vancouver-based mining firm that produces and explores for base and precious metals. Its producing assets include two B.C. mines: 100%-owned Mount Polley (copper and gold) and 50% of Huckleberry (copper and molybdenum). Japan’s Mitsubishi Materials owns 31.1% of Huckleberry, and Furukawa Co., Dowa Holdings and Marubeni Corp. own 6.3% each.
Imperial restarted Mount Polley in 2005 and continues to explore around the known deposit to increase the mine’s reserves and lengthen its life. Right now, Imperial expects Mount Polley to produce until mid- 2023.
The company is also developing its Red Chris copper/ gold property in northwestern B.C, where it could start up an open-pit mine as early as late 2014. The property holds as much as 9 billion pounds of copper and 13.8 million ounces of gold.
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Imperial restarted Mount Polley in 2005 and continues to explore around the known deposit to increase the mine’s reserves and lengthen its life. Right now, Imperial expects Mount Polley to produce until mid- 2023.
The company is also developing its Red Chris copper/ gold property in northwestern B.C, where it could start up an open-pit mine as early as late 2014. The property holds as much as 9 billion pounds of copper and 13.8 million ounces of gold.
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