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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THE CHURCHILL CORP. $8.95 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.5 million; Market cap: $219.3 million; Dividend yield: 5.4%) reported earnings of $1.8 million, or $0.07 a share, in the three months ended September 30, 2012. That was down sharply from $6.1 million, or $0.24 a share, a year earlier. Revenue fell 20.0%, to $303.2 million from $379.3 million.
Project delays were part of the reason for the declines. Churchill’s earnings also fell because of less-profitable contracts that should be completed by the end of this year.
Even with these setbacks, the company’s long-term prospects are sound. The stock trades at 17.2 times Churchill’s forecast 2013 earnings of $0.52 a share. Its dividend, which yields a high 5.4%, appears safe.
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Project delays were part of the reason for the declines. Churchill’s earnings also fell because of less-profitable contracts that should be completed by the end of this year.
Even with these setbacks, the company’s long-term prospects are sound. The stock trades at 17.2 times Churchill’s forecast 2013 earnings of $0.52 a share. Its dividend, which yields a high 5.4%, appears safe.
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GOODYEAR TIRE & RUBBER CO. $13.85 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 245.0 million; Market cap: $3.4 billion; No dividends paid) is the world’s largest tire maker, with 53 plants in 22 countries.
In the three months ended September 30, 2012, the weak global economy pushed down the company’s sales by 13.2%, to $5.26 billion from $6.06 billion a year earlier.
North American sales fell 6.0%, to $2.40 billion from $2.56 billion. Sales also declined by 20.1% in Latin America; 21.5% in Europe, the Middle East and Africa; and 5.7% in Asia. Unfavourable foreign currency moves also lowered Goodyear’s revenue.
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In the three months ended September 30, 2012, the weak global economy pushed down the company’s sales by 13.2%, to $5.26 billion from $6.06 billion a year earlier.
North American sales fell 6.0%, to $2.40 billion from $2.56 billion. Sales also declined by 20.1% in Latin America; 21.5% in Europe, the Middle East and Africa; and 5.7% in Asia. Unfavourable foreign currency moves also lowered Goodyear’s revenue.
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RUSSEL METALS $29.20 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 60.2 million; Market cap: $1.8 billion; Dividend yield: 4.8%) is one of North America’s largest metal distributors. The company serves its roughly 33,000 customers through 51 locations in Canada and 12 in the U.S.
In the three months ended September 30, 2012, Russel’s revenue rose 1.0%, to $712.6 million from $705.4 million a year earlier. Revenue at its steel distribution division fell 12%, and sales at the metal services business declined 2%. That’s because the slower economy pushed down steel demand. However, the energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 12% on higher drilling activity.
Earnings fell 12.5%, to $22.5 million, or $0.37 a share. A year earlier, Russel earned $25.7 million, or $0.43 a share. The company’s earnings fell even with the higher revenue because steel prices declined in the latest quarter. That cuts Russel’s profit margins and causes it to suffer losses on its current inventory.
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In the three months ended September 30, 2012, Russel’s revenue rose 1.0%, to $712.6 million from $705.4 million a year earlier. Revenue at its steel distribution division fell 12%, and sales at the metal services business declined 2%. That’s because the slower economy pushed down steel demand. However, the energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 12% on higher drilling activity.
Earnings fell 12.5%, to $22.5 million, or $0.37 a share. A year earlier, Russel earned $25.7 million, or $0.43 a share. The company’s earnings fell even with the higher revenue because steel prices declined in the latest quarter. That cuts Russel’s profit margins and causes it to suffer losses on its current inventory.
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ADOBE SYSTEMS $37.88 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536- 6000; www.adobe.com; Shares outstanding: 495.1 million; Market cap: $18.8 billion; No dividends paid) reports that in the fourth quarter of its 2012 fiscal year, which ended November 30, 2012, its earnings fell 7.4%, to $307.9 million from $332.6 million a year earlier.
Before one-time items, earnings per share declined 9.0%, to $0.61 from $0.67, on more shares outstanding. Revenue was flat at $1.15 billion.
Adobe is doing a good job of selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription service instead of a one-time purchase.
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Before one-time items, earnings per share declined 9.0%, to $0.61 from $0.67, on more shares outstanding. Revenue was flat at $1.15 billion.
Adobe is doing a good job of selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription service instead of a one-time purchase.
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INTACT FINANCIAL CORP. $65.21 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 133.3 million; Market cap: $8.7 billion; Dividend yield: 2.5%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.
In the three months ended September 30, 2012, Intact’s revenue rose 43.4%, to $1.66 billion from $1.16 billion a year earlier. That was mainly due to the contribution from AXA Canada, which Intact bought from Paris-based ASX Group for $2.6 billion in late 2011.
AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.
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In the three months ended September 30, 2012, Intact’s revenue rose 43.4%, to $1.66 billion from $1.16 billion a year earlier. That was mainly due to the contribution from AXA Canada, which Intact bought from Paris-based ASX Group for $2.6 billion in late 2011.
AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.
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BROADRIDGE FINANCIAL SOLUTIONS $22.97 (New York symbol BR: TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 122.2 million; Market cap: $2.8 billion; Dividend yield: 3.1%) serves the investment industry in three main areas: investor communications; securities processing; and transaction clearing. The company processes 85% of all proxy votes in the U.S.
Before one-time items, Broadridge’s earnings fell 2.2% in its fiscal first quarter ended September 30, 2012, to $22.3 million from $22.8 million a year earlier. Earnings per share were unchanged at $0.18 on fewer shares outstanding.
Sales rose 4.1%, to $495.8 million from $476.4 million. Broadridge continues to do a good job of attracting new clients and holding on to existing ones.
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Before one-time items, Broadridge’s earnings fell 2.2% in its fiscal first quarter ended September 30, 2012, to $22.3 million from $22.8 million a year earlier. Earnings per share were unchanged at $0.18 on fewer shares outstanding.
Sales rose 4.1%, to $495.8 million from $476.4 million. Broadridge continues to do a good job of attracting new clients and holding on to existing ones.
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LEON’S FURNITURE LTD. $13.40 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.5 million; Market cap: $944.7 million; Dividend yield: 3.0%) has received approval from shareholders of The Brick (symbol BRK on Toronto) for its $700-million takeover of that company.
The Brick operates 230 stores across Canada, while Leon’s has 76 outlets in every province except B.C. Leon’s and The Brick will continue to operate as separate chains.
Growth by acquisition can be risky, especially with a deal this big. But The Brick looks like a good fit with Leon’s.
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The Brick operates 230 stores across Canada, while Leon’s has 76 outlets in every province except B.C. Leon’s and The Brick will continue to operate as separate chains.
Growth by acquisition can be risky, especially with a deal this big. But The Brick looks like a good fit with Leon’s.
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SYMANTEC CORP. $20.71 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 693.9 million; Market cap: $14.4 billion; No dividends paid) sells computer-security technology, including anti-virus and email-filtering software, to businesses and consumers. It also offers data-archiving software that helps its clients meet increasingly strict regulatory and compliance standards.
In the three months ended September 28, 2012, Symantec’s revenue rose 1.0%, $1.70 billion from $1.68 billion a year earlier. The company gets 51% of its sales from overseas. Without the positive impact of exchange rates, revenue would have risen 5% in the latest quarter.
Successful cost cutting pushed up Symantec’s earnings per share by 15.4%, to $0.45 from $0.39, excluding one-time items.
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In the three months ended September 28, 2012, Symantec’s revenue rose 1.0%, $1.70 billion from $1.68 billion a year earlier. The company gets 51% of its sales from overseas. Without the positive impact of exchange rates, revenue would have risen 5% in the latest quarter.
Successful cost cutting pushed up Symantec’s earnings per share by 15.4%, to $0.45 from $0.39, excluding one-time items.
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ACI WORLDWIDE $44.87 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 39.4 million; Market cap: $1.8 billion; No dividends paid) makes software for processing transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments. Its products also help cut fraud.
In mid-February 2012, ACI completed its $540- million purchase of S1 Corp. This acquisition has been a good fit: S1 sells transaction software for banks, credit unions, retailers and other payment processors. It has over 3,000 clients worldwide.
In the third quarter of 2012, ACI’s revenue rose 38.3%, to $155.1 million from $112.1 million a year earlier. S1’s $47.8-million contribution was the main reason for the gain.
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In mid-February 2012, ACI completed its $540- million purchase of S1 Corp. This acquisition has been a good fit: S1 sells transaction software for banks, credit unions, retailers and other payment processors. It has over 3,000 clients worldwide.
In the third quarter of 2012, ACI’s revenue rose 38.3%, to $155.1 million from $112.1 million a year earlier. S1’s $47.8-million contribution was the main reason for the gain.
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CAMECO CORP. $20.79 (Toronto symbol CCO; TSINetwork Rating: Extra Risk) (306-956- 6200; www.cameco.com; Shares outstanding: 395.3 million; Market cap: $8.2 billion; Dividend yield 1.9%) has closed its $251-million purchase of Germany-based nuclear fuel broker Nukem Energy GmbH.
Nukem acts as an intermediary between uranium buyers and sellers. It also sells uranium from old Russian weapons and uranium mined in Uzbekistan.
The company’s supply from Russian nuclear weapons will end when the “Megatons to Megawatts” program concludes this year. The program was the result of a historic 20-year agreement signed between the U.S. and Russia in 1993.
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Nukem acts as an intermediary between uranium buyers and sellers. It also sells uranium from old Russian weapons and uranium mined in Uzbekistan.
The company’s supply from Russian nuclear weapons will end when the “Megatons to Megawatts” program concludes this year. The program was the result of a historic 20-year agreement signed between the U.S. and Russia in 1993.
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