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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DUNDEE REIT $34.37 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 97.0 million; Market cap: $3.3 billion; Dividend yield: 6.4%) owns and manages 22.9 million square feet of office and retail space. The trust has a 95.1% occupancy rate.
In the three months ended September 30, 2012, Dundee REIT’s revenue jumped 71.6%, to $187.3 million from $109.2 million a year earlier. Most of the increase came from properties the trust recently purchased.
Cash flow jumped 67.5%, to $61.3 million from $36.6 million. Cash flow per unit rose 5.2%, to $0.61 from $0.58, on more units outstanding (the trust issued new units to pay for the acquired properties). The units yield 6.4%.
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In the three months ended September 30, 2012, Dundee REIT’s revenue jumped 71.6%, to $187.3 million from $109.2 million a year earlier. Most of the increase came from properties the trust recently purchased.
Cash flow jumped 67.5%, to $61.3 million from $36.6 million. Cash flow per unit rose 5.2%, to $0.61 from $0.58, on more units outstanding (the trust issued new units to pay for the acquired properties). The units yield 6.4%.
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CHEMTRADE LOGISTICS INCOME FUND $15.49 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics. com; Units outstanding: 41.7 million; Market cap: $645.9 million; Dividend yield: 7.8%) is one of North America’s largest providers of removal services for resource firms, such as oil refineries and base-metal processors. These companies create sulphur, acid and other by-products as part of their activities. Chemtrade converts these substances into useful chemicals, like sulphuric acid.
In June 2011, Chemtrade bought Marsulex Inc. for $419.5 million. Marsulex provides a range of environmental services, including improving air quality and treating and handling industrial waste.
In the three months ended September 30, 2012, Chemtrade’s revenue fell 10.3%, to $240.9 million from $268.5 million a year earlier. Cash flow per unit fell 25.0%, to $0.72 from $0.96. However, the decline was mostly due to a one-time accounting charge. The 2011 quarter was also particularly strong.
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In June 2011, Chemtrade bought Marsulex Inc. for $419.5 million. Marsulex provides a range of environmental services, including improving air quality and treating and handling industrial waste.
In the three months ended September 30, 2012, Chemtrade’s revenue fell 10.3%, to $240.9 million from $268.5 million a year earlier. Cash flow per unit fell 25.0%, to $0.72 from $0.96. However, the decline was mostly due to a one-time accounting charge. The 2011 quarter was also particularly strong.
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DELPHI ENERGY $1.16 (Toronto symbol DEE; TSINetwork Rating: Speculative) (403- 265-6171; www.delphienergy.ca; Shares outstanding: 131.2 million; Market cap: $152.2 million; No dividends paid) has raised $33 million in two share issues: the company sold 17.2 million shares at $1.45 each and 4.6 million shares for $1.75 each.
The company produces and explores for oil (about 75% of production) and natural gas (25% of production).
Delphi plans to use the proceeds from the share issues to pay down debt. As of June 30, 2012, its long-term debt was $134.4 million. That’s a high 88% of its $152.2-million market cap (or the value of all of its outstanding shares). However, that mainly reflects the drop in the company’s share price due to lower natural gas prices.
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The company produces and explores for oil (about 75% of production) and natural gas (25% of production).
Delphi plans to use the proceeds from the share issues to pay down debt. As of June 30, 2012, its long-term debt was $134.4 million. That’s a high 88% of its $152.2-million market cap (or the value of all of its outstanding shares). However, that mainly reflects the drop in the company’s share price due to lower natural gas prices.
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CIMAREX ENERGY $60.76 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 86.0 million; Market cap: $5.2 billion; Dividend yield: 0.8%) produces and explores for oil and natural gas. Gas makes up 53% of its output.
Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas; the Permian Basin of western Texas and southeastern New Mexico; and the Texas Gulf Coast.
In the three months ended September 30, 2012, Cimarex’s production averaged 635.1 million cubic feet of natural gas equivalent per day (including oil). That’s up 7.3%, from 592.0 million cubic feet a year earlier.
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Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas; the Permian Basin of western Texas and southeastern New Mexico; and the Texas Gulf Coast.
In the three months ended September 30, 2012, Cimarex’s production averaged 635.1 million cubic feet of natural gas equivalent per day (including oil). That’s up 7.3%, from 592.0 million cubic feet a year earlier.
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DEVON ENERGY CORP. $53.06 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 404.5 million; Market cap: $21.5 billion; Dividend yield: 1.5%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 63% gas and 37% oil.
Last year, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.
Devon is forming joint ventures to cut the risk of its big development projects. Earlier this year, it sold a one-third stake in shale oil and gas fields in five U.S. states to giant Chinese state-owned petroleum and chemical firm Sinopec for $2.2 billion. More recently, Japan’s Sumitomo Corp. agreed to buy 30% of the Cline and Wolfcamp shales in Texas for $1.4 billion.
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Last year, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.
Devon is forming joint ventures to cut the risk of its big development projects. Earlier this year, it sold a one-third stake in shale oil and gas fields in five U.S. states to giant Chinese state-owned petroleum and chemical firm Sinopec for $2.2 billion. More recently, Japan’s Sumitomo Corp. agreed to buy 30% of the Cline and Wolfcamp shales in Texas for $1.4 billion.
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LEON’S FURNITURE LTD. $11.30 (Toronto symbol LNF; TSINetwork Rating: Average) (416 -243-7880; www.leons.ca; Shares outstanding: 70.0 million; Market cap: $791.0 million; Dividend yield: 3.5%) is nearly doubling its market cap by acquiring rival furniture chain The Brick (Toronto symbol BRK) for $700 million.
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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DOREL INDUSTRIES $37.83 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 31.5 million; Market cap: $1.2 billion; Dividend yield: 3.2%) makes a wide range of products, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational products, mostly bicycles.
In the three months ended September 30, 2012, Dorel’s sales rose 6.5%, to $613.3 million from $575.8 million a year earlier (all figures except share price and market cap in U.S. dollars). Excluding one-time items, earnings per share jumped 37.0%, to $0.63 from $0.46.
The company’s juvenile products division reported steadily rising sales of infant and children’s merchandise in North America and Europe, as well as strong gains in Chile. Sales of Schwinn and Mongoose bicycles also rose.
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In the three months ended September 30, 2012, Dorel’s sales rose 6.5%, to $613.3 million from $575.8 million a year earlier (all figures except share price and market cap in U.S. dollars). Excluding one-time items, earnings per share jumped 37.0%, to $0.63 from $0.46.
The company’s juvenile products division reported steadily rising sales of infant and children’s merchandise in North America and Europe, as well as strong gains in Chile. Sales of Schwinn and Mongoose bicycles also rose.
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CALIAN TECHNOLOGIES (Toronto symbol CTY; www.calian.com) operates in two areas: the business and technology services division (which supplies 70% of Calian’s revenue) provides engineers, health care workers and other skilled professionals to clients on a contract basis. The systems engineering division (30% of revenue) sells hardware and software for testing, operating and managing satellite and other communication systems. In the three months ended June 30, 2012, Calian’s revenue rose 1.4%, to $59.3 million from $58.5 million a year earlier. Earnings rose slightly, to $3.48 million, or $0.45 a share, from $3.45 million, or $0.45 a share....
MONSANTO CO. $86 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 534.6 million; Market cap: $46.0 billion; Price-to-sales ratio: 3.4; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.monsanto.com) is a multinational firm that sells technology-based agricultural products, such as genetically modified seeds, to farmers, grain processors and food companies. Overseas markets account for about 45% of its revenue.
Monsanto has two business segments. Its Seeds and Genomics division, which supplies 73% of its total revenue, makes genetically modified seeds for corn, soybeans and other crops.
The company gets the remaining 27% of its sales from its Agricul- tural Productivity division, which makes herbicides for farmers under the Roundup brand. Roundup accounts for about 10% of Monsanto’s overall sales. The company also makes lawn and garden herbicides for consumers.
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Monsanto has two business segments. Its Seeds and Genomics division, which supplies 73% of its total revenue, makes genetically modified seeds for corn, soybeans and other crops.
The company gets the remaining 27% of its sales from its Agricul- tural Productivity division, which makes herbicides for farmers under the Roundup brand. Roundup accounts for about 10% of Monsanto’s overall sales. The company also makes lawn and garden herbicides for consumers.
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MCGRAW-HILL COMPANIES INC. $55 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 280.2 million; Market cap: $15.4 billion; Price-to-sales ratio: 2.4; Dividend yield: 1.9%; TSINetwork Rating: Average; www.mcgraw-hill.com) will soon split into two separate, publicly traded companies.
One of these new firms, McGraw-Hill Financial, will sell financial-information products. This business will include Standard & Poor’s, which provides credit ratings on bonds, and McGraw-Hill’s J.D. Power market- research firm. Right now, this division supplies 60% of McGraw-Hill’s total revenue.
The other company, McGraw-Hill Education Inc., will publish textbooks for schools and colleges. It sells its products in 28 countries and 65 languages.
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One of these new firms, McGraw-Hill Financial, will sell financial-information products. This business will include Standard & Poor’s, which provides credit ratings on bonds, and McGraw-Hill’s J.D. Power market- research firm. Right now, this division supplies 60% of McGraw-Hill’s total revenue.
The other company, McGraw-Hill Education Inc., will publish textbooks for schools and colleges. It sells its products in 28 countries and 65 languages.
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