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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AMERIGO RESOURCES $0.65 (Toronto symbol ARG; TSINetwork Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 172.3 million; Market cap: $112.0 million; Dividend yield: 6.2%) processes copper and molybdenum from the waste rock from Chile’s El Teniente, the world’s largest copper mine. The contract runs at least through 2021. Amerigo also has an agreement to process material from the nearby Colihues tailings pond.
The company gets 94% of revenue by processing copper. The remaining 6% comes from molybdenum.
In the three months ended September 30, 2012, Amerigo’s revenue rose 5.4%, to $44.2 million from $42.0 million a year earlier (all figures except share price in U.S. dollars). The company offset lower copper and molybdenum prices by producing more of both metals.
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The company gets 94% of revenue by processing copper. The remaining 6% comes from molybdenum.
In the three months ended September 30, 2012, Amerigo’s revenue rose 5.4%, to $44.2 million from $42.0 million a year earlier (all figures except share price in U.S. dollars). The company offset lower copper and molybdenum prices by producing more of both metals.
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CENOVUS ENERGY INC. $34 (www.cenovus.com) has gained 33% since it became a separate company in December 2009. As a result, its long-term debt of $4.6 billion is now a more moderate 18% of its $25.5-billion market cap. That’s why we’ve upgraded Cenovus’s TSINetwork Rating from “Extra Risk” to “Average.” Buy.
HEWLETT-PACKARD CO. $14 (www.hp.com) recently wrote down its August 2008 purchase of Electronic Data Systems, provides computer services to large government agencies and corporations. It also wrote down its August 2011 purchase of U.K.-based Autonomy Corp., whose products help businesses organize a variety of information....
CHEVRON CORP. $110 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.0 billion; Market cap: $220.0 billion; Price-to-sales ratio: 0.9; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.chevron.com) is the second-largest integrated oil company in the U.S., after ExxonMobil Corp. (New York symbol XOM).
Chevron gets 90% of its earnings by producing oil (70% of production) and natural gas (30%). The remaining 10% comes from its refineries, petrochemical operations and its 17,800 gas stations, which operate under the Chevron, Texaco and Caltex banners.
At the end of 2011, the company’s reserves consisted of 8.5 billion barrels of oil equivalent (51% oil and 49% natural gas), plus an additional 2.7 billion barrels through joint ventures and affiliated businesses. The company produces about 1 billion barrels a year.
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Chevron gets 90% of its earnings by producing oil (70% of production) and natural gas (30%). The remaining 10% comes from its refineries, petrochemical operations and its 17,800 gas stations, which operate under the Chevron, Texaco and Caltex banners.
At the end of 2011, the company’s reserves consisted of 8.5 billion barrels of oil equivalent (51% oil and 49% natural gas), plus an additional 2.7 billion barrels through joint ventures and affiliated businesses. The company produces about 1 billion barrels a year.
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INTEL CORP. $21 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.0 billion; Market cap: $105.0 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.intel.com) is the world’s leading maker of computer chips. Its products power about 80% of the world’s personal computers.
Intel’s revenue fell 8.4%, from $38.4 billion in 2007 to $35.1 billion in 2009. That’s because businesses and consumers put off upgrading their computers during the recession. However, pent-up demand pushed up its revenue by 24.2%, to $43.6 billion, in 2010. In 2011, revenue rose 23.8%, to $54.0 billion.
Strong sales boosted Intel’s profits
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Intel’s revenue fell 8.4%, from $38.4 billion in 2007 to $35.1 billion in 2009. That’s because businesses and consumers put off upgrading their computers during the recession. However, pent-up demand pushed up its revenue by 24.2%, to $43.6 billion, in 2010. In 2011, revenue rose 23.8%, to $54.0 billion.
Strong sales boosted Intel’s profits
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SYMANTEC CORP. $19 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 693.9 million; Market cap: $13.2 billion; Price-to-sales ratio: 1.9; No dividends paid; TSINetwork Rating: Average; www.symantec- .com) aims to take advantage of rising interest in cloud computing with a new service called Norton Zone, which lets users securely store and share photos, videos and documents on remote servers. Customers can also share their files with other users and social networks.
Combining cloud storage with Symantec’s well-known Norton Anti-Virus software should help spur sales to consumers, who supply around 30% of its overall revenue. However, sales to businesses will likely remain weak until the economy improves.
Symantec is still a hold....
Combining cloud storage with Symantec’s well-known Norton Anti-Virus software should help spur sales to consumers, who supply around 30% of its overall revenue. However, sales to businesses will likely remain weak until the economy improves.
Symantec is still a hold....
DIAGEO PLC ADRs $119 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 627.2 million; Market cap: $74.6 billion; Price-to-sales ratio: 4.3; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.diageo.com) is buying 53.4% of United Spirits Ltd., India’s largest maker of alcoholic beverages. This business also imports and distributes drinks made by companies outside India.
Diageo will pay $2.1 billion for this stake when the deal closes in the first quarter of 2013. That’s equal to 3% of its market cap.
Expanding in fast-growing markets like India improves the company’s prospects. However, the stock has gained 40% in the past year and now trades at nearly 20 times Diageo’s earnings. That makes it vulnerable to a sudden drop if earnings growth slows.
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Diageo will pay $2.1 billion for this stake when the deal closes in the first quarter of 2013. That’s equal to 3% of its market cap.
Expanding in fast-growing markets like India improves the company’s prospects. However, the stock has gained 40% in the past year and now trades at nearly 20 times Diageo’s earnings. That makes it vulnerable to a sudden drop if earnings growth slows.
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MCKESSON CORP. $98 (New York symbol MCK; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 236.0 million; Market cap: $23.1 billion; Price-to-sales ratio: 0.2; Dividend yield: 0.8%; TSINetwork Rating: Above Average; www.mckesson.com) has agreed to purchase PSS World Medical Inc. (Nasdaq symbol PSSI), which distributes medical supplies to clinics and nursing homes.
The purchase will cost McKesson $2.1 billion. Combining PSS with its current surgical products distribution business should let McKesson cut its annual costs by $100 million by the end of the fourth year. To put these figures in context, McKesson earned $461 million, or $1.92 a share, in the three months ended September 30, 2012.
The company may have to sell some of its smaller businesses to win regulatory approval for this purchase, but it still aims to close the deal in early 2013.
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The purchase will cost McKesson $2.1 billion. Combining PSS with its current surgical products distribution business should let McKesson cut its annual costs by $100 million by the end of the fourth year. To put these figures in context, McKesson earned $461 million, or $1.92 a share, in the three months ended September 30, 2012.
The company may have to sell some of its smaller businesses to win regulatory approval for this purchase, but it still aims to close the deal in early 2013.
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APACHE CORP. $80 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 391.3 million; Market cap: $31.3 billion; Price-to-sales ratio: 1.9; Dividend yield: 0.9%; TSINetwork Rating: Average; www.apachecorp.com) had to write down some of its Canadian properties by $539 million due to low natural gas prices in the quarter ended September 30, 2012. If you disregard that and other unusual items, Apache would have earned $861 million, or $2.16 a share. That’s down 25.8% from $1.2 billion, or $2.95 a share, a year earlier. Revenue declined 3.4%, to $4.2 billion from $4.3 billion. Half of Apache’s production is gas, and gas prices fell 15.3% from a year earlier. Oil prices rose 0.9%.
The company is now producing more higher-priced oil and natural gas liquids, which cuts its exposure to low gas prices. As well, it produces half of its oil and gas in international markets, where prices are generally higher than in North America.
Apache is a buy.
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The company is now producing more higher-priced oil and natural gas liquids, which cuts its exposure to low gas prices. As well, it produces half of its oil and gas in international markets, where prices are generally higher than in North America.
Apache is a buy.
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YUM! BRANDS INC. $68 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 451.8 million; Market cap: $30.7 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.yum.com) has 36,087 fast-food restaurants in over 110 countries. Its main banners include KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food).
In the quarter ended September 8, 2012, Yum’s earnings rose 23.0%, to $471 million from $383 million a year earlier. The company spent $414 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 25.0%, to $1.00 from $0.80. Without unusual items, such as losses on sales of Pizza Hut restaurants in the U.K. to franchisees, earnings per share would have risen 19.3%, to $0.99 from $0.83. Sales rose 9.0%, to $3.6 billion from $3.3 billion a year earlier.
However, Yum expects its same-store sales in China to fall 4% in the fourth quarter; China accounts for 50% of its sales and 45% of its earnings.
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In the quarter ended September 8, 2012, Yum’s earnings rose 23.0%, to $471 million from $383 million a year earlier. The company spent $414 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 25.0%, to $1.00 from $0.80. Without unusual items, such as losses on sales of Pizza Hut restaurants in the U.K. to franchisees, earnings per share would have risen 19.3%, to $0.99 from $0.83. Sales rose 9.0%, to $3.6 billion from $3.3 billion a year earlier.
However, Yum expects its same-store sales in China to fall 4% in the fourth quarter; China accounts for 50% of its sales and 45% of its earnings.
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