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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Alimentation Couche-Tard $53.33, symbol ATD.B on Toronto, was our #1 pick for 2012 in Stock Pickers Digest at $30.55. Its shares are now up 74.6%.
WestJet, our #1 pick for this year (see left), was trading at $14.10 when we made it our #1 Stock of the Year for 2011. It was a year late getting started, but it’s now up 58.1% since then.
Even with that jump, we think WestJet has big gains ahead. In an industry that thrives on passenger satisfaction and trust, the company’s non-unionized workforce is a huge plus.
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WestJet, our #1 pick for this year (see left), was trading at $14.10 when we made it our #1 Stock of the Year for 2011. It was a year late getting started, but it’s now up 58.1% since then.
Even with that jump, we think WestJet has big gains ahead. In an industry that thrives on passenger satisfaction and trust, the company’s non-unionized workforce is a huge plus.
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AIMIA INC. $15.93 (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: 4.0%) owns and operates Aeroplan, Canada’s largest loyalty program, and Nectar, the U.K.’s biggest loyalty program. In addition, Aimia has interests in Air Miles Middle East and Nectar Italia, as well as Club Premier, the leading loyalty program in Mexico.
In the nine months ended September 30, 2012, Aimia’s revenue rose 1.0%, to $1.63 billion from $1.61 billion a year earlier. Excluding one-time items, earnings per share rose 33.8%, to $1.03 from $0.77. The company’s cost per mile awarded dropped significantly, partly because it is making better use of its computer systems. Redemptions also fell.
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In the nine months ended September 30, 2012, Aimia’s revenue rose 1.0%, to $1.63 billion from $1.61 billion a year earlier. Excluding one-time items, earnings per share rose 33.8%, to $1.03 from $0.77. The company’s cost per mile awarded dropped significantly, partly because it is making better use of its computer systems. Redemptions also fell.
… but it faces three risks in 2013
WESTJET AIRLINES $22.29 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 132.3 million; Market cap: $2.9 billion; Divd. yield: 1.8%) serves 81 destinations in North America, Central America and the Caribbean. Its fleet of 100 modern Boeing 737s are 30% more fuel efficient than older jets. WestJet plans to take delivery of 35 more 737s through 2018.
In the three months ended December 31, 2012, the company’s revenue rose 10.1%, to $860.6 million from $781.5 million a year earlier. Demand for its flights remains high. Earnings per share rose 76.9%, to $0.46 from $0.26. WestJet has also raised its quarterly dividend by 25%, to $0.10 from $0.08. The shares now yield 1.9%.
WestJet continues to add ticketing and baggage-transfer alliances with other airlines, including Cathay Pacific, British Airways, Delta Airlines and American Airlines. This lets it reach new markets while limiting its risk. WestJet has also invested heavily in a state-of-the-art computer reservation system.
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In the three months ended December 31, 2012, the company’s revenue rose 10.1%, to $860.6 million from $781.5 million a year earlier. Demand for its flights remains high. Earnings per share rose 76.9%, to $0.46 from $0.26. WestJet has also raised its quarterly dividend by 25%, to $0.10 from $0.08. The shares now yield 1.9%.
WestJet continues to add ticketing and baggage-transfer alliances with other airlines, including Cathay Pacific, British Airways, Delta Airlines and American Airlines. This lets it reach new markets while limiting its risk. WestJet has also invested heavily in a state-of-the-art computer reservation system.
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LOBLAW COMPANIES $42(Toronto symbol L; Sharesoutstanding: 281.6 million; Marketcap: $11.8 billion; TSINetworkRating: Above Average; Dividendyield: 2.1%; www.loblaw.ca) is upover 25% since December 6, 2012,when it said that it plans to form areal estate investment trust (REIT) tohold the bulk of its real estate assets.
The company currently owns 47million square feet of real estate witha value between $9 billion and $10billion.
Loblaw will transfer 35 millionsquare feet of these holdings—includingstores, warehouses andoffice buildings—to the REIT. In all,these assets are worth about $7billion. Loblaw will then rent theseproperties from the new trust.
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The company currently owns 47million square feet of real estate witha value between $9 billion and $10billion.
Loblaw will transfer 35 millionsquare feet of these holdings—includingstores, warehouses andoffice buildings—to the REIT. In all,these assets are worth about $7billion. Loblaw will then rent theseproperties from the new trust.
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GOOGLE INC. (Nasdaq symbol GOOG; www.google.com) is the world’s top Internet search engine, with about two-thirds of this market. The company makes money by selling advertising on its websites. Google gets 96% of its revenue from advertising....
A month ago, we examined one of the energy stocks we cover in our newsletter for aggressive investing, Stock Pickers Digest. Zargon Oil and Gas (Toronto symbol ZAR) has trimmed its commitment to natural gas due to the slump in prices (view the article here). Today, in the wake of a recent rally in oil prices, we look at the prospects for a tech stock that serves the oil and gas drilling industry.
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p>GOOGLE INC. $742 (Nasdaq symbol GOOG; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 328.6 million; Market cap: $243.8 billion; Price-to-sales ratio: 4.6; No dividends paid; TSINetwork Rating: Above Average; www.google.com) is the world’s top Internet search engine, with about two-thirds of this market. The company makes money by selling advertising on its websites. Google gets 96% of its revenue from advertising.
The company also offers a variety of free services such as Gmail (email), YouTube (videos) and Google+ (social networking). These services help draw more users to Google’s websites, which lets the company sell more ads and charge higher ad rates.
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The company also offers a variety of free services such as Gmail (email), YouTube (videos) and Google+ (social networking). These services help draw more users to Google’s websites, which lets the company sell more ads and charge higher ad rates.
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JONES GROUP INC. $12(New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.0 million; Market cap: $960.0 million; Price-to-sales ratio: 0.3; Dividend yield: 1.7%; TSINetwork Rating: Average; www.jonesgroupinc.com) earned $42.9 million in the three months ended September 29, 2012. That’s up 10.0% from $39.0 million a year earlier. Earnings per share rose 18.8%, to $0.57 from $0.48, on fewer shares outstanding. That’s mainly because the company is doing a good job of cutting costs and controlling its inventories.
Sales fell 0.7%, to $1.03 billion from $1.04 billion. Jones gets half of its sales from department stores, which are seeing strong demand for the company’s shoes and jeans. However, sales at Jones’s own stores, which mainly focus on upscale brands, fell sharply as cost-conscious consumers shifted to discount retailers.
Jones Group is a hold.
Sales fell 0.7%, to $1.03 billion from $1.04 billion. Jones gets half of its sales from department stores, which are seeing strong demand for the company’s shoes and jeans. However, sales at Jones’s own stores, which mainly focus on upscale brands, fell sharply as cost-conscious consumers shifted to discount retailers.
Jones Group is a hold.
NVIDIA CORP. $12 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 624.9 million; Market cap: $7.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.5%; TSINetwork Rating: Average; www.nvidia.com) has developed a new handheld video game system. Called the Shield, this device features a 5-inch, high-definition touch screen that plays games designed for Google’s Android mobile operating system. Users can also wirelessly stream games from their computers to the Shield.
Nvidia normally designs chips for other manufacturers, so making its own device adds risk. However, the Shield should help it profit from the growth of mobile gaming. As well, developers already make games for Android, so Nvidia can focus solely on hardware. That gives it an advantage over competitors like Sony and Nintendo, which must convince programmers to make games specifically for their systems.
Nvidia is a buy....
Nvidia normally designs chips for other manufacturers, so making its own device adds risk. However, the Shield should help it profit from the growth of mobile gaming. As well, developers already make games for Android, so Nvidia can focus solely on hardware. That gives it an advantage over competitors like Sony and Nintendo, which must convince programmers to make games specifically for their systems.
Nvidia is a buy....
AGILENT TECHNOLOGIES INC. $44 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 347.9 million; Market cap: $15.3 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.1%; TSINetwork Rating: Average; www. agilent.com) makes testing systems that help electronics companies improve their products. It also manufactures testing equipment for medical research labs.
Agilent recently raised its quarterly dividend by 20.0%, to $0.12 a share from $0.10. The new annual rate of $0.48 yields 1.1%. As well, the company will buy back up to $500 million of its shares in the fiscal year ending October 31, 2013. That’s equal to 3% of its market cap. These repurchases will reduce the dilution caused by shares it will issue under its employee stock option plan.
Agilent is a buy.
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Agilent recently raised its quarterly dividend by 20.0%, to $0.12 a share from $0.10. The new annual rate of $0.48 yields 1.1%. As well, the company will buy back up to $500 million of its shares in the fiscal year ending October 31, 2013. That’s equal to 3% of its market cap. These repurchases will reduce the dilution caused by shares it will issue under its employee stock option plan.
Agilent is a buy.
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