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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TEMPUR-PEDIC $24.77 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempurpedic.com; Shares outstanding: 59.6 million; Market cap: $1.5 billion; No dividends paid) makes and distributes Swedish mattresses and neck pillows made from its proprietary Tempur material, which conforms to the body to provide support and help alleviate pressure points.
Tempur-Pedic’s shares are down 69.7% since they hit an all-time high of $87.43 in April 2012. Competitors have introduced many new products and supported them with aggressive promotions. That has steadily pushed down Tempur-Pedic’s results.
In the three months ended September 30, 2012, revenue fell 9.2%, to $347.9 million from $383.1 million a year earlier. Excluding one-time items, earnings per share fell 22.2%, to $0.70 from $0.90.
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Tempur-Pedic’s shares are down 69.7% since they hit an all-time high of $87.43 in April 2012. Competitors have introduced many new products and supported them with aggressive promotions. That has steadily pushed down Tempur-Pedic’s results.
In the three months ended September 30, 2012, revenue fell 9.2%, to $347.9 million from $383.1 million a year earlier. Excluding one-time items, earnings per share fell 22.2%, to $0.70 from $0.90.
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INTUITIVE SURGICAL $526.46 (Nasdaq symbol ISRG; TSINetwork Rating: Average) (515-507-5000; www.intuitivesurgical.com; Shares outstanding: 39.8 million; Market cap: $21.0 billion; No dividends paid) makes the da Vinci, a computerized surgical system.
Guided by a miniature camera connected to a 3-D monitor, surgeons use the da Vinci to operate by remotely manipulating tiny robotic arms. This process is safer and much less invasive than regular surgery, and helps cut a patient’s recovery time and post-operative discomfort. It also reduces scarring and infection risk.
In the three months ended September 30, 2012, Intuitive earned $183.3 million, or $4.59 a share. That’s up sharply from $122.4 million, or $3.13 a share, a year earlier. Revenue rose 20.4%, to $537.8 million from $446.7 million. Intuitive is debt-free, and holds cash of $2.7 billion, or $67.67 a share.
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Guided by a miniature camera connected to a 3-D monitor, surgeons use the da Vinci to operate by remotely manipulating tiny robotic arms. This process is safer and much less invasive than regular surgery, and helps cut a patient’s recovery time and post-operative discomfort. It also reduces scarring and infection risk.
In the three months ended September 30, 2012, Intuitive earned $183.3 million, or $4.59 a share. That’s up sharply from $122.4 million, or $3.13 a share, a year earlier. Revenue rose 20.4%, to $537.8 million from $446.7 million. Intuitive is debt-free, and holds cash of $2.7 billion, or $67.67 a share.
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FORTRESS PAPER $7.00 (Toronto symbol FTP; TSINetwork Rating: Extra Risk) (1-888- 820-3888; www.fortresspaper.com; Shares outstanding: 14.5 million; Market cap: $101.5 million; No dividends paid) lost $18.1 million, or $1.26 a share, in the three months ended September 30, 2012. A year earlier, it lost $7.7 million, or $0.54. Cash flow was negative $9.5 million, or $0.66 a share, in the latest quarter, compared to negative $3.7 million, or $0.26 a share.
The company’s Dresden wallpaperproducts plant is profitable, but the Landqart security-paper operation is losing money because of the high Swiss franc. Increased competition is also making it difficult for Fortress to attract customers. As well, the Thurso dissolving pulp plant is having startup problems, and rising global production has pushed down selling prices sharply.
Fortress holds cash of $83.8 million or $5.88 a share, but its long-term debt of $245 million is a very high 241% of its $101.5- million market cap. That’s a big risk factor, especially in a company that’s reporting negative cash flow.
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The company’s Dresden wallpaperproducts plant is profitable, but the Landqart security-paper operation is losing money because of the high Swiss franc. Increased competition is also making it difficult for Fortress to attract customers. As well, the Thurso dissolving pulp plant is having startup problems, and rising global production has pushed down selling prices sharply.
Fortress holds cash of $83.8 million or $5.88 a share, but its long-term debt of $245 million is a very high 241% of its $101.5- million market cap. That’s a big risk factor, especially in a company that’s reporting negative cash flow.
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TIM HORTONS $45.75 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 154.4 million; Market cap: $7.1 billion; Dividend yield: 1.8%) operates 3,365 coffee and donut stores in Canada and 755 in the U.S. It also has 16 outlets in the Persian Gulf.
New menu items, such as lattes and panini sandwiches, are selling well. In addition, the company now offers free Wi-Fi Internet at its Canadian outlets. That’s helping it compete with fast-food chains like McDonald’s, which is aggressively expanding its coffee sales in Canada. Sales of Tim Hortons singleserve cups for Tassimo coffee machines are also rising.
These factors pushed up Tim Hortons sales by 10.3% in the three months ended September 30, 2012, to $802.0 million from $726.9 million a year earlier. Same-store sales rose 2.3% at its U.S. outlets and 1.9% in Canada. Earnings per share rose 4.6%, to $0.68 from $0.65.
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New menu items, such as lattes and panini sandwiches, are selling well. In addition, the company now offers free Wi-Fi Internet at its Canadian outlets. That’s helping it compete with fast-food chains like McDonald’s, which is aggressively expanding its coffee sales in Canada. Sales of Tim Hortons singleserve cups for Tassimo coffee machines are also rising.
These factors pushed up Tim Hortons sales by 10.3% in the three months ended September 30, 2012, to $802.0 million from $726.9 million a year earlier. Same-store sales rose 2.3% at its U.S. outlets and 1.9% in Canada. Earnings per share rose 4.6%, to $0.68 from $0.65.
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SYMANTEC CORP. $17.53 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 693.9 million; Market cap: $12.2 billion; No dividends paid) sells computer-security technology, including anti-virus and email-filtering software, to businesses and consumers.
In the company’s 2013 second quarter, which ended September 28, 2012, its earnings per share rose 15.4%, to $0.45 from $0.39. Revenue rose 1.1%, to $1.70 billion from $1.68 billion.
Symantec is selling more of its products to businesses, partly because it is now offering its salespeople higher incentives for bringing in new contracts than for renewals.
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In the company’s 2013 second quarter, which ended September 28, 2012, its earnings per share rose 15.4%, to $0.45 from $0.39. Revenue rose 1.1%, to $1.70 billion from $1.68 billion.
Symantec is selling more of its products to businesses, partly because it is now offering its salespeople higher incentives for bringing in new contracts than for renewals.
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ATLANTIC TELE-NETWORK $36.75 (Nasdaq symbol ATNI; TSINetwork Rating: Speculative) (340- 777-8000; www.atni.com; Shares outstanding: 15.6 million; Market cap: $573.3 million; Yield: 2.7%) reported strong earnings in the latest quarter, even though revenue declined.
In the three months ended September 30, 2012, Atlantic’s revenue fell 2.9%, to $188.8 million from $194.3 million a year earlier. However, earnings jumped 40.8%, to $16.0 million, or $1.03 a share, from $11.3 million, or $0.74 a share.
The company stands to make further gains as it sells more smartphones, which generate higher fees than regular cellphones. As well, it is upgrading its wireless networks to 4G long-term evolution (LTE) standards. LTE is up to five times faster than current networks, and should help it attract new subscribers.
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In the three months ended September 30, 2012, Atlantic’s revenue fell 2.9%, to $188.8 million from $194.3 million a year earlier. However, earnings jumped 40.8%, to $16.0 million, or $1.03 a share, from $11.3 million, or $0.74 a share.
The company stands to make further gains as it sells more smartphones, which generate higher fees than regular cellphones. As well, it is upgrading its wireless networks to 4G long-term evolution (LTE) standards. LTE is up to five times faster than current networks, and should help it attract new subscribers.
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AIMIA INC. $14.80 (Toronto symbol AIM; TSINetwork Rating: Extra Risk) (514-205-7315; www.aimia.com; Shares outstanding: 172.3 million; Market cap: $2.6 billion; Dividend yield: 4.3%) has agreed to raise its stake in Club Premier Loyalty & Marketing, the loyalty program of Grupo Aeromexico, Mexico’s biggest airline. This move is part of Aimia’s plan to diversify its operations geographically.
Aimia will pay $88 million U.S. to increase its interest to 49% from 29%. Grupo Aeromexico will continue to own 51%.
Club Premier is Mexico’s leading loyalty program, with more than 2.8 million members and 50 partners. Club Premier members can earn and redeem points on Aeromexico, which offers 550 daily flights throughout the Americas and to Europe and Asia. As well, members can earn points on 14 other airlines, including Delta and Air France-KLM.
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Aimia will pay $88 million U.S. to increase its interest to 49% from 29%. Grupo Aeromexico will continue to own 51%.
Club Premier is Mexico’s leading loyalty program, with more than 2.8 million members and 50 partners. Club Premier members can earn and redeem points on Aeromexico, which offers 550 daily flights throughout the Americas and to Europe and Asia. As well, members can earn points on 14 other airlines, including Delta and Air France-KLM.
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ALARMFORCE INDUSTRIES $11.23 (Toronto symbol AF TSINetwork Rating: Speculative) (1-800- 267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $137.0 million; Dividend yield: 0.9%) sells twoway voice alarm systems and monitoring services in Canada and increasingly in the U.S. It’s also adding to its prospects with its VideoRelay system, which it launched in October 2011.
In the three months ended July 31, 2012, Alarm- Force’s sales rose 10.9%, to $11.4 million from $10.3 million a year earlier. Even so, AlarmForce lost $6,589, or nil per share, compared to a profit of $831,342, or $0.07.
AlarmForce’s earnings fell because it increased its advertising spending as it expanded into Florida. It also invested more in its VideoRelay system, which lets subscribers watch their homes through their computers and smartphones. Users can either view live video or receive alerts when the system detects motion. VideoRelay also lets you establish two-way voice communication through the camera.
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In the three months ended July 31, 2012, Alarm- Force’s sales rose 10.9%, to $11.4 million from $10.3 million a year earlier. Even so, AlarmForce lost $6,589, or nil per share, compared to a profit of $831,342, or $0.07.
AlarmForce’s earnings fell because it increased its advertising spending as it expanded into Florida. It also invested more in its VideoRelay system, which lets subscribers watch their homes through their computers and smartphones. Users can either view live video or receive alerts when the system detects motion. VideoRelay also lets you establish two-way voice communication through the camera.
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STANTEC INC. $36.68 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.9 million; Market cap: $1.7 billion; Dividend yield: 1.6%) sells a range of consulting, project delivery, design and technology services. Stantec’s clients operate in a variety of industries, including transportation, construction and oil and gas.
In the three months ended September 30, 2012, Stantec’s revenue rose 12.4%, to $483.7 million from $430.4 million a year earlier. Acquisitions were one reason for the gains. Stantec is also working on several new projects. Earnings rose 17.9%, to $34.1 million, or $0.74 a share, from $28.9 million, or $0.63.
Stantec continues to grow by acquisition. In 2011, it bought five companies. Its purchases this year include engineering-consulting firm Cimarron Engineering, which develops, designs, installs and maintains oil and gas pipeline systems and station facilities. Demand for these services is growing quickly.
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In the three months ended September 30, 2012, Stantec’s revenue rose 12.4%, to $483.7 million from $430.4 million a year earlier. Acquisitions were one reason for the gains. Stantec is also working on several new projects. Earnings rose 17.9%, to $34.1 million, or $0.74 a share, from $28.9 million, or $0.63.
Stantec continues to grow by acquisition. In 2011, it bought five companies. Its purchases this year include engineering-consulting firm Cimarron Engineering, which develops, designs, installs and maintains oil and gas pipeline systems and station facilities. Demand for these services is growing quickly.
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WESTJET AIRLINES $18.55 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1- 877-493-7853; www.westjet.com; Shares outstanding: 126.9 million; Market cap: $2.4 billion; Dividend yield: 1.7%) reports that its revenue rose 11.8% in the three months ended September 30, 2012, to $866.5 million from $775.3 million a year earlier.
Earnings jumped 79.9%, to $70.6 million from $39.3 million. That’s a new record for the second quarter. The higher revenue pushed up the company’s earnings.
WestJet aims to start up its new shorthaul Canadian regional airline, which it has now named WestJet Encore, by the end of 2013. Encore will serve smaller centres with Bombardier turboprop planes.
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Earnings jumped 79.9%, to $70.6 million from $39.3 million. That’s a new record for the second quarter. The higher revenue pushed up the company’s earnings.
WestJet aims to start up its new shorthaul Canadian regional airline, which it has now named WestJet Encore, by the end of 2013. Encore will serve smaller centres with Bombardier turboprop planes.
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