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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MCDONALD’S CORP. $90 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.0 billion; Market cap: $90.0 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.mcdonalds.com) operates 34,000 restaurants in 119 countries. Two-thirds of its sales come from outside the U.S. It serves a variety of foods, but is best known for its hamburgers and french fries.
McDonald’s continues to benefit from strong demand for its Dollar Menu, which features items like breakfast sandwiches and coffee for just $1. It is also seeing strong sales of new premium items and foods that it sells on a limited-time basis.
The company’s same-store sales rose 2.4% in November 2012. Most of these gains came from the U.S., where same-store sales increased 2.5%. Same-store sales rose 1.4% in Europe, as gains in the U.K. and Russia offset weakness in Germany. Asian same-store sales rose 0.6%, as gains in Australia offset weakness in Japan.
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McDonald’s continues to benefit from strong demand for its Dollar Menu, which features items like breakfast sandwiches and coffee for just $1. It is also seeing strong sales of new premium items and foods that it sells on a limited-time basis.
The company’s same-store sales rose 2.4% in November 2012. Most of these gains came from the U.S., where same-store sales increased 2.5%. Same-store sales rose 1.4% in Europe, as gains in the U.K. and Russia offset weakness in Germany. Asian same-store sales rose 0.6%, as gains in Australia offset weakness in Japan.
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WESTERN UNION CO. $14 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 596.6 million; Market cap: $8.4 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.westernunion.com) provides money-transfer and foreign-exchange services in over 200 countries.
In the three months ended September 30, 2012, the company’s earnings rose 12.4%, to $269.5 million from $239.7 million a year earlier. Western Union is an aggressive buyer of its own shares. Because of fewer shares outstanding, earnings per share rose at a faster pace of 18.4%, to $0.45 from $0.38.
If you exclude the cost of integrating the businesspayments division of U.K.-based Travelex Holdings, which Western Union bought in 2011, per-share earnings would have risen 15.0%, to $0.46 from $0.40.
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In the three months ended September 30, 2012, the company’s earnings rose 12.4%, to $269.5 million from $239.7 million a year earlier. Western Union is an aggressive buyer of its own shares. Because of fewer shares outstanding, earnings per share rose at a faster pace of 18.4%, to $0.45 from $0.38.
If you exclude the cost of integrating the businesspayments division of U.K.-based Travelex Holdings, which Western Union bought in 2011, per-share earnings would have risen 15.0%, to $0.46 from $0.40.
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ENCANA CORP. $20 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $16.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.6%; TSINetwork Rating: Average; www.encana.com) has formed a joint venture with PetroChina International Investment Company Ltd., which is controlled by the Chinese government, to develop its Duvernay property in central Alberta. This field mainly contains natural gas liquids, such as butane.
Under the terms of the deal, Encana sold a 49.9% stake in Duvernay to PetroChina for $2.2 billion (Canadian). Encana will own the remaining 50.1% and will operate the project. PetroChina has already paid Encana $1.2 billion. It will pay the remaining $1.0 billion over the next four years.
Joint ventures like this help speed up the development of promising new fields. Moreover, as PetroChina is buying only a minority interest in this project, the deal complies with the federal government’s new foreign investment guidelines. Ottawa brought in these new rules in response to the takeover of oil-sands operator Nexen Inc. by another state-owned Chinese oil company.
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Under the terms of the deal, Encana sold a 49.9% stake in Duvernay to PetroChina for $2.2 billion (Canadian). Encana will own the remaining 50.1% and will operate the project. PetroChina has already paid Encana $1.2 billion. It will pay the remaining $1.0 billion over the next four years.
Joint ventures like this help speed up the development of promising new fields. Moreover, as PetroChina is buying only a minority interest in this project, the deal complies with the federal government’s new foreign investment guidelines. Ottawa brought in these new rules in response to the takeover of oil-sands operator Nexen Inc. by another state-owned Chinese oil company.
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FAIR ISAAC CORP. $42 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 34.9 million; Market cap: $1.5 billion; Price-to-sales ratio: 2.2; Dividend yield: 0.2%; TSINetwork Rating: Average; www.fico.com) makes FICO Scores, a computer program that helps businesses make better decisions about customer creditworthiness. It is also profiting by selling software that helps credit card issuers control fraud and analyze cardholders’ spending patterns.
The company is benefiting from the recovery of the U.S. banking industry and rising demand for mortgages. In addition, Fair Isaac is expanding internationally. It is now working with China’s central bank to develop a standard credit score. This has big potential, particularly as the country’s banking system matures.
In addition, Fair Isaac recently paid $113.0 million for Adeptra, a U.K.-based company whose systems let businesses communicate with customers through a range of channels, including voice, instant messaging, mobile applications and email.
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The company is benefiting from the recovery of the U.S. banking industry and rising demand for mortgages. In addition, Fair Isaac is expanding internationally. It is now working with China’s central bank to develop a standard credit score. This has big potential, particularly as the country’s banking system matures.
In addition, Fair Isaac recently paid $113.0 million for Adeptra, a U.K.-based company whose systems let businesses communicate with customers through a range of channels, including voice, instant messaging, mobile applications and email.
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T. ROWE PRICE GROUP INC. $66 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 254.9 million; Market cap: $16.8 billion; Price-to-sales ratio: 5.8; Dividend yield: 2.1%; TSINetwork Rating: Average; www.troweprice.com) sells mutual funds and wealth management services.
On September 30, 2012, the company had a record $574.4 billion of assets under management, up 17.3% from $489.5 billion at the end of 2011.
The company continues to see strong demand for its “Retirement Funds,” which invest in other Price Group mutual funds and automatically adjust the buyer’s portfolio balance according to their age. Retirement Funds accounted for 47% of the company’s fund sales in the latest quarter.
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On September 30, 2012, the company had a record $574.4 billion of assets under management, up 17.3% from $489.5 billion at the end of 2011.
The company continues to see strong demand for its “Retirement Funds,” which invest in other Price Group mutual funds and automatically adjust the buyer’s portfolio balance according to their age. Retirement Funds accounted for 47% of the company’s fund sales in the latest quarter.
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GENERAL ELECTRIC CO. $21 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.5 billion; Market cap: $220.5 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.ge.com) is benefiting from its recent purchases of companies that supply equipment to oil and natural gas producers. It’s also cutting credit losses at its finance subsidiary.
As a result, GE has raised its quarterly dividend by 11.8%, to $0.19 a share from $0.17. The new annual rate of $0.76 yields 3.6%. This is its fifth dividend hike in the past three years. GE also plans to buy back up to $14.9 billion of its shares by 2015.
GE is a buy.
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As a result, GE has raised its quarterly dividend by 11.8%, to $0.19 a share from $0.17. The new annual rate of $0.76 yields 3.6%. This is its fifth dividend hike in the past three years. GE also plans to buy back up to $14.9 billion of its shares by 2015.
GE is a buy.
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THE BOEING CO. $76 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 754.1 million; Market cap: $57.3 billion; Priceto- sales ratio: 0.7; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.boeing.com) continues to receive orders for its new 787 Dreamliner and 737 MAX passenger jets.
In the three months ended September 30, 2012, Boeing booked orders for 369 planes, net of cancellations. Its commercial aircraft division, which supplies 60% of its total revenue, now has a $307-billion backlog that consists of over 4,100 planes. The company’s military division (40% of revenue) also continues to win new orders. Its backlog is $71 billion.
As a result, Boeing’s overall revenue rose 12.9% in the quarter, to $20.0 billion from $17.7 billion a year earlier. However, a $194-million increase in pension costs caused its earnings to fall 6.0%, to $1.0 billion from $1.1 billion. Earnings per share fell 7.5%, to $1.35 from $1.46, on more shares outstanding.
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In the three months ended September 30, 2012, Boeing booked orders for 369 planes, net of cancellations. Its commercial aircraft division, which supplies 60% of its total revenue, now has a $307-billion backlog that consists of over 4,100 planes. The company’s military division (40% of revenue) also continues to win new orders. Its backlog is $71 billion.
As a result, Boeing’s overall revenue rose 12.9% in the quarter, to $20.0 billion from $17.7 billion a year earlier. However, a $194-million increase in pension costs caused its earnings to fall 6.0%, to $1.0 billion from $1.1 billion. Earnings per share fell 7.5%, to $1.35 from $1.46, on more shares outstanding.
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UNITED TECHNOLOGIES CORP. $83 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 916.5 million; Market cap: $76.1 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.utc.com) recently purchased Goodrich Corp., a North Carolina-based company that makes aircraft parts, including landing gear, wheels and brakes. United Technologies paid $18.4 billion, including $1.9 billion of assumed debt.
To win regulatory approval, United Technologies agreed to sell some of its smaller businesses. For example, it recently sold three subsidiaries in its aerospace division for a total of $3.5 billion.
United Technologies now expects overall revenue of between $64 billion and $65 billion in 2013, up 10% to 12% from $58 billion in 2012. Goodrich will supply about half of this growth. The rest will come from improving sales at its other businesses, including Pratt & Whitney jet engines and Otis elevators.
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To win regulatory approval, United Technologies agreed to sell some of its smaller businesses. For example, it recently sold three subsidiaries in its aerospace division for a total of $3.5 billion.
United Technologies now expects overall revenue of between $64 billion and $65 billion in 2013, up 10% to 12% from $58 billion in 2012. Goodrich will supply about half of this growth. The rest will come from improving sales at its other businesses, including Pratt & Whitney jet engines and Otis elevators.
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FEDEX CORP. $93 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 314.1 million; Market cap: $29.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.6%; TSI Network Rating: Average; www.fedex.com) reported that its earnings in the three months ended November 30, 2012 fell 11.9%, to $438 million, or $1.39 a share. That’s mainly because Hurricane Sandy forced the company to suspend parcel deliveries on the U.S. eastern seaboard. A year earlier, it earned $497 million, or $1.57 a share.
Revenue in the quarter rose 4.9%, to $11.1 billion from $10.6 billion. Strong demand for its lower-priced ground transportation services offset weaker demand for overnight deliveries.
FedEx continues to restructure its operations, mainly by cutting workers at its international air delivery division. It is also replacing older planes with more fuel-efficient models. These moves should save it $1.7 billion a year starting in 2014.
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Revenue in the quarter rose 4.9%, to $11.1 billion from $10.6 billion. Strong demand for its lower-priced ground transportation services offset weaker demand for overnight deliveries.
FedEx continues to restructure its operations, mainly by cutting workers at its international air delivery division. It is also replacing older planes with more fuel-efficient models. These moves should save it $1.7 billion a year starting in 2014.
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IBM $192.95, symbol IBM on New York, shows that we don’t beat the market every time! It only eked out a 0.5% gain as our #1 pick for 2012 in Wall Street Stock Forecaster at $192.