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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ZARGON OIL & GAS $7.76 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 29.8 million; Market cap: $231.2 million; Dividend yield: 9.3%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. Its production is 67% oil and 33% gas. In the three months ended September 30, 2012, Zargon produced 7,634 barrels of oil equivalent per day, down 15.3% from 9,014 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 4.0%, to $0.48 from $0.50 a year earlier. The company continues to successfully drill horizontal wells in the Alberta Plains North area. Horizontal drilling involves drilling development wells sideways or at an angle to reach isolated pockets of gas or to follow a reservoir spread out in a narrow layer. Horizontal drilling can work well in places where conventional drilling is impossible or too expensive....
TRILOGY ENERGY CORP. $28.25 (Toronto symbol TET; TSINetwork Rating: Speculative) (403-290- 2900; www.trilogy.com; Shares outstanding: 116.5 million; Market cap: $3.3 billion; Dividend yield: 1.5%) owns oil and gas properties in the Kaybob and Grande Prairie areas of central Alberta. About 62% of Trilogy’s production is natural gas. The remaining 38% is oil. In the three months ended September 30, 2012, Trilogy produced 33,412 barrels of oil equivalent per day (including gas). That’s up 15.1% from 29,035 barrels a year earlier. But even with the higher production, a 40.1% decline in gas prices pushed down the company’s cash flow per share by 21.6%, to $0.40 from $0.51. Trilogy pays out just 26% of its cash flow as dividends. That gives it a low 1.5% yield, but it’s also letting the company maintain an active drilling program. In the first three quarters of 2012, Trilogy spent $274 million on exploration and development, up 10.5% from $248 million in the same period a year earlier. The company drilled 55 wells, up 25.0% from 44....
CHIPOTLE MEXICAN GRILL $275.51 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 31.5 million; Market cap: $8.7 billion; No dividends paid) is a Denver- based Mexican-restaurant chain. It charges slightly higher prices than fast-food companies, but it offers better-quality food, including naturally raised meat, and superior decor and service. In the three months ended September 30, 2012, Chipotle’s sales rose 18.4%, to $700.5 million from $591.9 million a year earlier. The company opened 36 new outlets in the quarter. As well, its existing restaurants attracted more customers. That pushed up its same-restaurant sales by 4.8%. Earnings per share rose 24.5%, to $1.93 from $1.55. Chipotle now has 1,350 locations. The company will open 165 to 180 new restaurants in 2013. That should further increase its sales. However, rising food costs will keep putting pressure on its profit margins, and it’s uncertain whether Chipotle can raise its prices enough to offset those increases....
DOMINO’S PIZZA $42.06 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 56.8 million; Market cap: $2.4 billion; No dividends paid) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,040 outlets in the U.S. and over 70 in other countries. Franchisees run most of these stores. In the quarter ended September 9, 2012, the company’s earnings per share rose 22.2%, to $0.44 from $0.36 a year earlier. Sales rose slightly, to $378.1 million from $376.3 million. Same-store sales rose 5.0% internationally and 3.3% in the U.S. Domino’s continues to boost its sales by aggressively promoting its new pizza recipes. It’s also profiting by moving into digital ordering on the Internet and through software applications (or apps) on smartphones. In addition, Domino’s still has lots of growth potential overseas....
NISSAN MOTOR CO. (ADR) $18.72 (Nasdaq symbol NSANY; TSINetwork Rating: Above Average) (310-771-3111; www.nissan-global.com; Shares outstanding: 2.3 billion; Market cap: $43.1 billion; No dividends paid) has reported record North American sales for the month of November. Overall, the company sold 96,197 cars and trucks on the continent during the month. That’s up 12.9% from 85,182 vehicles in November 2011. Like all automakers, Nissan needs a renewed global economic recovery to keep pushing up its sales. Meanwhile, its outlook remains positive....
CALIAN TECHNOLOGIES $20.80 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613- 599-8600; www.calian.com; Shares outstanding: 7.6 million; Market cap: $158.1 million; Dividend yield: 5.4%) has reported improved results in the latest quarter. In the three months ended September 30, 2012, Calian earned $3.4 million, or $0.44 a share. That’s up slightly from $3.3 million, or $0.43 a share, a year ago. Revenue rose 4.9%, to $58.1 million from $55.4 million. Calian’s Business and Technology Services division, which provides 70% of the company’s overall revenue, continues to benefit from steady orders from various Canadian federal government departments, including the Department of National Defence....
REITMANS (CANADA) LTD. $11.75 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514- 384-1140; www.reitmans.com; Shares outstanding: 65.5 million; Market cap: $769.6 million; Dividend yield: 6.8%) reports that its sales fell 7.0% in the three months ended October 27, 2012, to $236.2 million from $254.1 million a year earlier. Same-store sales declined 4.0%. The company earned $38,000, or nil per share, compared to a profit of $10.6 million, or $0.16 a share, a year earlier. In June 2012, Reitmans installed new inventorymanagement software at its distribution centre, and complications with this system have disrupted shipments to its stores. In the latest quarter, that cut sales at the company’s outlets by $7 million to $15 million and caused a corresponding drop in profits....
TOROMONT INDUSTRIES LTD. $21.77 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 76.3 million; Market cap: $1.6 billion; Dividend yield: 2.2%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. Toromont also makes refrigeration systems through its CIMCO division. In July 2011, the company completed the spinoff of Enerflex Ltd. (see at right). Shareholders received shares of the new Toromont and shares of Enerflex. Sales and profits keep rising...
Knowing when to sell a stock is one of the keys to successful investing. That’s why we advise investors to follow an important rule when it comes to rising stocks. When prices go down, investors naturally focus on when to sell aggressive stocks. However, you also need to consider when to sell after strong moves up by hot stocks....
Pat McKeough responds to many personal questions about specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for the Inner Circle. Recently, we received a question from an Inner Circle member about one of the world’s most visible technology stocks, Internet giant Yahoo. Pat discusses the state of the company following its recent hiring of a new CEO away from its most powerful rival, Google. Pat also took the opportunity to compare the prospects of both of these Internet giants....
