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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LIMITED BRANDS INC. $44 (New York symbol LTD; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 288.4 million; Market cap: $12.7 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.7%; TSINetwork Rating: Average; www.- limitedbrands.com) owns the Victoria’s Secret lingerie chain and the Bath & Body Works personalcare products stores.
Limited is restructuring the La Senza lingerie chain in Canada, including closing a third of its stores (it now has 158 outlets) and shifting its focus to younger shoppers.
In its 2013 fiscal year, which ended February 2, 2013, Limited’s sales rose just 0.9%, to $10.5 billion from $10.4 billion in 2012. That’s mainly because it closed 65 stores, bringing its total down to 2,876. However, same-store sales rose 6%, including 7% gains at both the Victoria’s Secret division, which includes La Senza, and Bath & Body Works.
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Limited is restructuring the La Senza lingerie chain in Canada, including closing a third of its stores (it now has 158 outlets) and shifting its focus to younger shoppers.
In its 2013 fiscal year, which ended February 2, 2013, Limited’s sales rose just 0.9%, to $10.5 billion from $10.4 billion in 2012. That’s mainly because it closed 65 stores, bringing its total down to 2,876. However, same-store sales rose 6%, including 7% gains at both the Victoria’s Secret division, which includes La Senza, and Bath & Body Works.
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STANLEY BLACK & DECKER INC. $82 (New York symbol SWK; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 160.3 million; Market cap: $13.1 billion; Priceto- sales ratio: 1.3; Dividend yield: 2.4%; TSINetwork Rating: Average; www.stanleyblackanddecker.com) has completed its purchase of Infastech, a Hong Kong-based fastener maker that serves the automotive, electronic, construction and aerospace markets. The purchase price of $850 million is equal to 1.1 times the $778.7 million, or $4.67 a share, that Stanley earned in 2012. Infastech should add $0.20 a share to Stanley’s 2013 earnings.
Thanks to this new business, Stanley now gets 16% of its revenue from emerging markets like Asia and Latin America. It aims to raise this to 20% by 2015.
Stanley Black & Decker is a buy....
Thanks to this new business, Stanley now gets 16% of its revenue from emerging markets like Asia and Latin America. It aims to raise this to 20% by 2015.
Stanley Black & Decker is a buy....
APPLE INC. $451 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 939.1 million; Market cap: $423.5 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.4%; TSINetwork Rating: Average; www.apple.com) is down 36% from its all-time high of $705.07 in September 2012.
Thanks to the huge success of the iPhone and iPad, as well as the star power of the late Steve Jobs, Apple’s co-founder and CEO, the company became a media and broker favourite. However, increasing competition from devices powered by Google’s Android software have hurt Apple’s appeal.
The company still has a loyal customer base and will probably use some of its $137.1 billion in cash and investments to increase is dividend and buy back shares. Even so, the stock will continue to have trouble living up to investors’high expectations.
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Thanks to the huge success of the iPhone and iPad, as well as the star power of the late Steve Jobs, Apple’s co-founder and CEO, the company became a media and broker favourite. However, increasing competition from devices powered by Google’s Android software have hurt Apple’s appeal.
The company still has a loyal customer base and will probably use some of its $137.1 billion in cash and investments to increase is dividend and buy back shares. Even so, the stock will continue to have trouble living up to investors’high expectations.
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PHILIPS ELECTRONICS N.V. ADRs $31 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 914.6 million; Market cap: $28.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 3.0%; TSINetwork Rating: Average; www.philips.com) gets about 50% of its revenue by making health care products, such as Xray and magnetic resonance imaging (MRI) scanners. It also makes lighting (30% of revenue) and consumer electronics, such as appliances and electric razors (20%).
The company recently agreed to sell its video and audio products business to Japan’s Funai Electronics for 150 million euros (1 euro = $1.32 Canadian). As part of the deal, it will receive royalties on sales of Philipsbranded products for at least the next five years.
Philips also continues to make progress with a major restructuring plan, which includes making its plants more efficient and cutting 4% of its workforce. Moreover, Philips is expanding sales in emerging markets like Turkey, Russia and China.
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The company recently agreed to sell its video and audio products business to Japan’s Funai Electronics for 150 million euros (1 euro = $1.32 Canadian). As part of the deal, it will receive royalties on sales of Philipsbranded products for at least the next five years.
Philips also continues to make progress with a major restructuring plan, which includes making its plants more efficient and cutting 4% of its workforce. Moreover, Philips is expanding sales in emerging markets like Turkey, Russia and China.
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ABB LTD. ADRs $23 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $52.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.abb.com) is a leading maker of power technologies for utilities, including transformers, transmission systems and circuit breakers. The Switzerland-based company also makes automation systems and robotics that industrial clients use to make their facilities more productive.
ABB is taking advantage of the slow economy to make acquisitions. In May 2012, it paid $3.7 billion for Thomas & Betts Corp., which makes a number of industrial products, including heating and air condi- tioning equipment, electrical connectors and transmission towers for power companies. Combining some of its functions with those of Thomas & Betts could save ABB $200 million a year by 2016.
These new operations pushed up ABB’s revenue by 3.5% in 2012, to $39.3 billion from $38.0 billion in 2011. Without the negative impact of the high U.S. dollar, which hurts the contribution of its overseas operations, revenue would have risen 7% in 2012.
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ABB is taking advantage of the slow economy to make acquisitions. In May 2012, it paid $3.7 billion for Thomas & Betts Corp., which makes a number of industrial products, including heating and air condi- tioning equipment, electrical connectors and transmission towers for power companies. Combining some of its functions with those of Thomas & Betts could save ABB $200 million a year by 2016.
These new operations pushed up ABB’s revenue by 3.5% in 2012, to $39.3 billion from $38.0 billion in 2011. Without the negative impact of the high U.S. dollar, which hurts the contribution of its overseas operations, revenue would have risen 7% in 2012.
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BHP BILLITON LTD. ADRs $70 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.7 billion; Market cap: $189.0 billion; Price-to-sales ratio: 2.7; Dividend yield: 3.3%; TSINetwork Rating: Average; www.bhpbilliton.com) is the world’s largest mining company, with major operations in Australia, South Africa, Chile and the U.K. Its main products include iron ore, coal, aluminum, manganese, titanium, oil and natural gas.
In the six months ended December 31, 2012, BHP earned $5.7 billion, or $2.14 per ADR. (BHP’s fiscal year ends June 30; each ADR represents two BHP common shares.) That’s down 43.4% from $10.0 billion, or $3.77 per ADR, a year earlier. Lower prices for commodities, particularly iron ore, cut BHP’s gross profits by $5.4 billion in the latest period. Unfavourable exchange rates also lowered earnings by $574 million. Revenue fell 14.1%, to $32.2 billion from $37.5 billion.
In response to weak commodity prices, BHP has agreed to sell $4.3 billion of less-important projects. That includes a deal to sell its remaining diamond operations in Canada for $500 million.
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In the six months ended December 31, 2012, BHP earned $5.7 billion, or $2.14 per ADR. (BHP’s fiscal year ends June 30; each ADR represents two BHP common shares.) That’s down 43.4% from $10.0 billion, or $3.77 per ADR, a year earlier. Lower prices for commodities, particularly iron ore, cut BHP’s gross profits by $5.4 billion in the latest period. Unfavourable exchange rates also lowered earnings by $574 million. Revenue fell 14.1%, to $32.2 billion from $37.5 billion.
In response to weak commodity prices, BHP has agreed to sell $4.3 billion of less-important projects. That includes a deal to sell its remaining diamond operations in Canada for $500 million.
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THE BOEING CO. $85 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 756.2 million; Market cap: $64.3 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.boeing.com) had to ground all of its new 787 Dreamliner passenger planes in January 2013 after a battery problem forced one to make an emergency landing in Japan.
The 787 uses advanced rechargeable lithium-ion batteries to power its electrical systems. These batteries were overheating, which increases the risk of a fire. The company has redesigned the battery and feels flights will resume in the next few weeks.
The stock fell to $75 after the grounding but has rebounded strongly. That’s mainly due to Boeing’s quick response. Demand for the company’s other planes also remains strong.
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The 787 uses advanced rechargeable lithium-ion batteries to power its electrical systems. These batteries were overheating, which increases the risk of a fire. The company has redesigned the battery and feels flights will resume in the next few weeks.
The stock fell to $75 after the grounding but has rebounded strongly. That’s mainly due to Boeing’s quick response. Demand for the company’s other planes also remains strong.
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TUPPERWARE BRANDS CORP. $80 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 54.0 million; Market cap: $4.3 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.tupperwarebrands.com) gets 75% of its sales by making plastic food and beverage containers and children’s educational toys. The remaining 25% comes from cosmetics, bath oils and fragrances. Its main brands include Tupperware, Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare and Nuvo.
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NEWELL RUBBERMAID INC. $26 (New York symbol NWL; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 286.4 million; Market cap: $7.4 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.3%; TSINetwork Rating: Average; www.newellrubbermaid.com) makes plastic storage bins, tools, window blinds, pens and a number of other household items. Its top brands include Rubbermaid, Sharpie, Paper Mate, Parker, Graco, Waterman and Levolor.
The company has six divisions: Home Solutions makes foodstorage and cooking products (28% of Newell’s 2012 sales); Writing makes pens and markers (24%); Tools makes hand and power tools, as well as accessories (14%); Commercial Products makes cleaning products (13%); Baby & Parenting makes high chairs, car seats and other products for infants (12%); and Specialty makes a variety of products, such as window blinds and paint brushes (9%). Wal-Mart accounts for around 11% of Newell’s sales.
Newell’s sales fell 13.8%, from $6.5 billion in 2008 to $5.6 billion in 2009, mainly because consumers cut spending during the recession. As well, Newell stopped making certain unprofitable products. However, sales rebounded to $5.9 billion in 2012.
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The company has six divisions: Home Solutions makes foodstorage and cooking products (28% of Newell’s 2012 sales); Writing makes pens and markers (24%); Tools makes hand and power tools, as well as accessories (14%); Commercial Products makes cleaning products (13%); Baby & Parenting makes high chairs, car seats and other products for infants (12%); and Specialty makes a variety of products, such as window blinds and paint brushes (9%). Wal-Mart accounts for around 11% of Newell’s sales.
Newell’s sales fell 13.8%, from $6.5 billion in 2008 to $5.6 billion in 2009, mainly because consumers cut spending during the recession. As well, Newell stopped making certain unprofitable products. However, sales rebounded to $5.9 billion in 2012.
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DUNDEE REIT $36.11 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 97.7 million; Market cap: $3.7 billion; Dividend yield: 6.1%) owns and manages 22.9 million square feet of office and retail space. The trust has a 95.1% occupancy rate.
In the three months ended December 31, 2012, Dundee REIT’s revenue jumped 51.3%, to $192.0 million from $126.9 million a year earlier. In 2012, Dundee made $2.6 billion of acquisitions and added 9.9 million square feet of office space. These properties supplied most of the revenue increase.
Cash flow jumped 41.4%, to $58.1 million from $41.0 million. However, cash flow per unit fell 8.1%, to $0.57 from $0.62, on more units outstanding (the trust issued new units to pay for the acquired properties).
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In the three months ended December 31, 2012, Dundee REIT’s revenue jumped 51.3%, to $192.0 million from $126.9 million a year earlier. In 2012, Dundee made $2.6 billion of acquisitions and added 9.9 million square feet of office space. These properties supplied most of the revenue increase.
Cash flow jumped 41.4%, to $58.1 million from $41.0 million. However, cash flow per unit fell 8.1%, to $0.57 from $0.62, on more units outstanding (the trust issued new units to pay for the acquired properties).
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