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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CALIAN TECHNOLOGIES $20.50 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613- 599-8600; www.calian.com; Shares outstanding: 7.7 million; Market cap: $157.9 million; Dividend yield: 5.5%) 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.
Earlier this year, Calian bought Primacy Management Inc. of Burlington, Ontario, for $5.2 million. Since 2003, Primacy has been designing, building and managing in-store health clinics for Loblaw Companies (symbol L on Toronto). Primacy now operates 112 such clinics in Loblaw’s stores across Canada.
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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.
Earlier this year, Calian bought Primacy Management Inc. of Burlington, Ontario, for $5.2 million. Since 2003, Primacy has been designing, building and managing in-store health clinics for Loblaw Companies (symbol L on Toronto). Primacy now operates 112 such clinics in Loblaw’s stores across Canada.
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FAIRFAX FINANCIAL HOLDINGS $362.94 (Toronto symbol FFH: TSINetwork Rating: Average) (416-367-2612; www.fairfax.ca; Shares outstanding: 19.9 million; Market cap: $7.2 billion; Dividend yield: 2.7%) mainly sells insurance and reinsurance, but it also manages investments, including a $3.8-billion stock portfolio. To protect these stock investments against a market drop, the company has insured its entire portfolio using derivatives.
This strategy lowers the company’s losses if markets drop, but it also cuts sharply into share-price gains when markets go up. That means that if markets continue to rise—as we think they will—Fairfax’s derivatives will significantly hold back the company’s share price.
Fairfax is now a sell.
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This strategy lowers the company’s losses if markets drop, but it also cuts sharply into share-price gains when markets go up. That means that if markets continue to rise—as we think they will—Fairfax’s derivatives will significantly hold back the company’s share price.
Fairfax is now a sell.
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CARFINCO FINANCIAL GROUP $9.98 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888- 486-4356; www.carfinco.com; Shares outstanding: 24.6 million; Market cap: $245.5 million; Dividend yield: 4.8%) provides car loans to consumers who aren’t able to meet the criteria of traditional lenders, like banks.
The company offers its loans through 1,459 car dealers across Canada. About 60% of its loan portfolio is in western Canada, and 40% is in eastern Canada. The company recently entered the Quebec market.
In the three months ended June 30, 2012, Carfinco’s revenue rose 22.9%, to $17.7 million from $14.4 million a year earlier. The company loaned a record $36.8 million in the latest quarter, up 31.4% from $28.0 million.
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The company offers its loans through 1,459 car dealers across Canada. About 60% of its loan portfolio is in western Canada, and 40% is in eastern Canada. The company recently entered the Quebec market.
In the three months ended June 30, 2012, Carfinco’s revenue rose 22.9%, to $17.7 million from $14.4 million a year earlier. The company loaned a record $36.8 million in the latest quarter, up 31.4% from $28.0 million.
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INTACT FINANCIAL CORP. $60 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341-1464; www.intactfc.com; Shares outstanding: 129.6 million; Market cap: $7.8 billion; Dividend yield: 2.7%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.
In the three months ended June 30, 2012, Intact’s revenue rose 47.8%, to $1.59 billion from $1.08 billion a year earlier. That was mainly due to the contribution from AXA Canada, which Intact bought from Parisbased ASX Group for $2.6 billion last year.
AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.
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In the three months ended June 30, 2012, Intact’s revenue rose 47.8%, to $1.59 billion from $1.08 billion a year earlier. That was mainly due to the contribution from AXA Canada, which Intact bought from Parisbased ASX Group for $2.6 billion last year.
AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.
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WESTJET AIRLINES $18.00 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1- 877-493-7853; www.westjet.com; Shares outstanding: 126.3 million; Market cap: $2.3 billion; Dividend yield: 1.8%) is now in the process of upgrading its interline agreement with British Airways to a full code-sharing arrangement. This will be WestJet’s eighth code-sharing deal.
Code-sharing agreements let airlines sell seats on one another’s planes using the same two-digit code. In this case, the BA code will be used when travellers on British Airways flights to Vancouver, Calgary and Toronto connect to WestJet-operated flights to Ottawa, Edmonton and Victoria.
Code-sharing agreements are especially valuable for attracting business passengers because they let customers seamlessly connect between flights and gain frequent flyer points for the entire distance travelled.
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Code-sharing agreements let airlines sell seats on one another’s planes using the same two-digit code. In this case, the BA code will be used when travellers on British Airways flights to Vancouver, Calgary and Toronto connect to WestJet-operated flights to Ottawa, Edmonton and Victoria.
Code-sharing agreements are especially valuable for attracting business passengers because they let customers seamlessly connect between flights and gain frequent flyer points for the entire distance travelled.
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DOMINO’S PIZZA $41.20 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 56.7 million; Market cap: $2.3 billion; No dividends paid) continues to benefit from its new pizza recipes, digital ordering and aggressive international expansion.
The stock jumped over 7% on October 16, 2012, when the company reported higher earnings in the quarter ended September 9, 2012. Earnings per share jumped 22.2%, to $0.44 from $0.36 a year earlier. Same-store sales rose 3.3% in the U.S. and 5.0% internationally.
Domino’s opened its 10,000th store in September. It now has 10,040 outlets in the U.S. and over 70 other countries. Franchisees run most of its stores.
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The stock jumped over 7% on October 16, 2012, when the company reported higher earnings in the quarter ended September 9, 2012. Earnings per share jumped 22.2%, to $0.44 from $0.36 a year earlier. Same-store sales rose 3.3% in the U.S. and 5.0% internationally.
Domino’s opened its 10,000th store in September. It now has 10,040 outlets in the U.S. and over 70 other countries. Franchisees run most of its stores.
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AIMIA INC. $14.95 (Toronto symbol AIM; TSINetwork Rating: Extra Risk) (514-205-7315; www.aimia.com; Shares outstanding: 172.2 million; Market cap: $2.6 billion; Dividend yield: 4.3%) got its start as Air Canada’s frequent-flyer program in 1984. In 2005, the airline created the Aeroplan Income Fund and began selling units to the public.
The fund converted to a corporation under the Groupe Aeroplan name in 2008. In May 2012, it changed its name to Aimia.
The fund converted to a corporation under the Groupe Aeroplan name in 2008. In May 2012, it changed its name to Aimia.
Moving beyond Aeroplan
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Pat McKeough responds to many personal questions on investing in 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. This week, a question from an Inner Circle member asked about one of the technology stocks that has been on an upward trend. Pat looks at whether this wireless company can keep growing in a competitive market with new smartphone initiatives....
This summer, natural gas prices dropped below $2 U.S.per thousand cubic feet, a 10-year low. That’s mainly because of new shale gas discoveries. Prices are now around $2.84, still well below last year’s high of almost $5. Oil prices have weakened, as well. They are now down 16%, from $109 a barrel in February to $92 today. Oil prices will continue to vary, while gas prices will likely recover. The key for this tech stock that serves the energy industry is that prices remain high enough to generate increased drilling for both oil and gas....
Pat McKeough responds to many personal questions on investing in 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, an Inner Circle member asked about a company that has created a strong niche for itself in dental products. The company is growing internationally, and Pat assesses whether increased strength in Asia can offset slower growth in Europe. ...
