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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FAIR ISAAC CORP. $44.95 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 33.8 million; Market cap: $1.5 billion; Dividend yield: 0.2%) has been awarded seven patents by the U.S. Patent and Trademark Office. That brings the company’s total number of patent awards to 128.
Two of the new patents relate to Fair Isaac’s FICO Insurance Fraud Manager software, which detects fraud, waste and abuse in health care claims. These patents cover a method for analyzing codes that health care providers enter to represent specific medical procedures. That helps the program catch both potential and ongoing systematic fraud.
Four of the seven patents were for inventions used in FICO’s Blaze Advisor decision-management software. Additionally, FICO was awarded a patent for an invention related to the FICO Score, the standard measure of consumer credit risk in the U.S. This helps determine the conditions in credit scoring in which additional information is needed. FICO spends a high 9% of its revenue on research and development. That lets it stay ahead of the competition—and patent awards like these help reinforce its research efforts.
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Two of the new patents relate to Fair Isaac’s FICO Insurance Fraud Manager software, which detects fraud, waste and abuse in health care claims. These patents cover a method for analyzing codes that health care providers enter to represent specific medical procedures. That helps the program catch both potential and ongoing systematic fraud.
Four of the seven patents were for inventions used in FICO’s Blaze Advisor decision-management software. Additionally, FICO was awarded a patent for an invention related to the FICO Score, the standard measure of consumer credit risk in the U.S. This helps determine the conditions in credit scoring in which additional information is needed. FICO spends a high 9% of its revenue on research and development. That lets it stay ahead of the competition—and patent awards like these help reinforce its research efforts.
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ALIMENTATION COUCHE-TARD $45.20 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 179.4 million; Market cap: $8.1 billion; Dividend yield: 0.7%) has reported sharply higher sales and earnings in its latest quarter. Without one-time costs related to its $2.7-billion purchase of Statoil Fuel & Retail ASA, the company’s earnings per share rose 26.7%, to $0.95 from $0.75 (all figures except share price in U.S. dollars). Sales rose 16.1% to $6.0 billion from $5.2 billion.
The gains came from higher fuel prices, acquisitions and higher merchandise sales. (The company gets about 30% of its sales by selling merchandise.) The results also included 11 days of operations from the Statoil gas station chain.
Alimentation Couche-Tard is still our #1 buy for 2012.
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The gains came from higher fuel prices, acquisitions and higher merchandise sales. (The company gets about 30% of its sales by selling merchandise.) The results also included 11 days of operations from the Statoil gas station chain.
Alimentation Couche-Tard is still our #1 buy for 2012.
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SASOL LTD. (ADR) $46.39 (New York symbol SSL; TSINetwork Rating: Extra Risk) (082-883-9697; www.sasol.com; ADRs outstanding: 645.0 million; Market cap: $29.9 billion; Dividend yield: 3.1%) reports that in its fiscal year ended June 30, 2012, revenue rose 19.0%, to $20.3 billion from $17.1 billion in the previous fiscal year (all figures in U.S. dollars). Earnings per ADR rose 25.8%, to $5.05 from $3.99.
Higher oil prices were the main reason for the gains. The U.S. dollar also rose against the South African rand; that pushed up the value of Sasol’s sales outside South Africa.
The company plans to build an $8-billion to $9-billion gas-to-liquids (GTL) plant in Louisiana. It has also completed a feasibility study for an $8-billion GTL plant in Alberta.
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Higher oil prices were the main reason for the gains. The U.S. dollar also rose against the South African rand; that pushed up the value of Sasol’s sales outside South Africa.
The company plans to build an $8-billion to $9-billion gas-to-liquids (GTL) plant in Louisiana. It has also completed a feasibility study for an $8-billion GTL plant in Alberta.
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DELPHI ENERGY $1.19 (Toronto symbol DEE; TSINetwork Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 131.2 million; Market cap: $156.1 million; No dividends paid) explores for oil and natural gas in Alberta and B.C. Gas makes up 74% of Delphi’s daily output; the remaining 26% is oil. In the three months ended June 30, 2012, Delphi’s average daily output fell 3.0%, to 8,636 barrels of oil equivalent (including natural gas) from 8,906 barrels a year earlier. Disruptions at third-party processing facilities were the main reason for the decline.
The lower production, plus lower natural gas prices, pushed down Delphi’s cash flow to $0.05 a share from $0.15.
The company’s debt of $134.4 million is a high 86.1% of its market cap. However, Delphi trades at 4.4 times its forecast 2012 cash flow of $0.27 a share, and only 3.1 times the 2012 forecast cash flow of $0.38 a share.
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The lower production, plus lower natural gas prices, pushed down Delphi’s cash flow to $0.05 a share from $0.15.
The company’s debt of $134.4 million is a high 86.1% of its market cap. However, Delphi trades at 4.4 times its forecast 2012 cash flow of $0.27 a share, and only 3.1 times the 2012 forecast cash flow of $0.38 a share.
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BELLATRIX EXPLORATION $3.82 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266- 8670; www.bellatrixexploration.com; Shares outstanding: 107.5 million; Market cap: $410.7 million; No dividends paid) produces oil and natural gas in Alberta, B.C. and Saskatchewan. Gas makes up about 63% of its output; the remaining 37% is oil.
In the three months ended June 30, 2012, Bellatrix’s production rose 42.3%, to 16,569 barrels of oil equivalent per day (including natural gas) from 11,643 barrels. The company’s highly effective drilling continues to add to its production: in the latest quarter, it drilled 15 wells with a 100% success rate.
Cash flow per share rose 4.3%, to $0.24 from $0.23. Bellatrix’s selling price for gas fell 50%, to $2.03 U.S. per thousand cubic feet from $4.06 U.S. a year ago. However, the big production increase offset that decline. The company’s long-term debt is $164.1 million, or a manageable 40% of its market cap.
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In the three months ended June 30, 2012, Bellatrix’s production rose 42.3%, to 16,569 barrels of oil equivalent per day (including natural gas) from 11,643 barrels. The company’s highly effective drilling continues to add to its production: in the latest quarter, it drilled 15 wells with a 100% success rate.
Cash flow per share rose 4.3%, to $0.24 from $0.23. Bellatrix’s selling price for gas fell 50%, to $2.03 U.S. per thousand cubic feet from $4.06 U.S. a year ago. However, the big production increase offset that decline. The company’s long-term debt is $164.1 million, or a manageable 40% of its market cap.
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TIM HORTONS $51.37 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 154.9 million; Market cap: $8.0 billion; Dividend yield: 1.6%) aims to take advantage of fast-growing interest in home coffee systems.
Under a new agreement, Kraft Foods and Tim Hortons will make and sell plastic cups, called T-Discs, filled with Tim Hortons premium blend coffee, including decaf and latte, and sealed with a foil top.
Kraft’s Tassimo beverage machine pierces the foil and brews a fresh single cup. The Tassimo system also scans a barcode on the T-Disc that tells it how much water to use, how long to brew the coffee and how hot it should be.
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Under a new agreement, Kraft Foods and Tim Hortons will make and sell plastic cups, called T-Discs, filled with Tim Hortons premium blend coffee, including decaf and latte, and sealed with a foil top.
Kraft’s Tassimo beverage machine pierces the foil and brews a fresh single cup. The Tassimo system also scans a barcode on the T-Disc that tells it how much water to use, how long to brew the coffee and how hot it should be.
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RUSSEL METALS $27.96 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 60.1 million; Market cap: $1.7 billion; Dividend yield: 5.0%) is one of North America’s largest metal distributors. The company serves its roughly 33,000 customers through a network of 51 locations in Canada and 12 in the U.S.
In the three months ended June 30, 2012, Russel’s revenue rose 16.2%, to $718.7 million from $618.6 million a year earlier. All three of the company’s divisions saw gains: higher sales volumes pushed up revenue by 11% at both the steel-distribution and metalservices businesses. And revenue jumped 32% at the energy tubular products division, which supplies pipes for oil and gas firms, thanks to an increase in drilling activity.
Without one-time items, earnings per share fell 13.5%, to $0.45 from $0.52 a year earlier. The company’s earnings fell despite the higher revenue because steel prices declined in the latest quarter. That cuts Russel’s profit margins and causes it to suffer losses on its current inventory.
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In the three months ended June 30, 2012, Russel’s revenue rose 16.2%, to $718.7 million from $618.6 million a year earlier. All three of the company’s divisions saw gains: higher sales volumes pushed up revenue by 11% at both the steel-distribution and metalservices businesses. And revenue jumped 32% at the energy tubular products division, which supplies pipes for oil and gas firms, thanks to an increase in drilling activity.
Without one-time items, earnings per share fell 13.5%, to $0.45 from $0.52 a year earlier. The company’s earnings fell despite the higher revenue because steel prices declined in the latest quarter. That cuts Russel’s profit margins and causes it to suffer losses on its current inventory.
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GOODYEAR TIRE & RUBBER CO. $13.48 (NewYork symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 244.7 million; Market cap: $3.3 billion; No dividends paid) is the world’s largest tire maker, with over 60 plants in 25 countries.
In the three months ended June 30, 2012, the company’s sales fell 8.4%, to $5.15 billion from $5.62 billion a year earlier.
North American sales rose 1.7%, to $2.5 billion from $2.4 billion, but weak economic growth cut sales by 21.4% in Latin America; 17.9% in Europe, the Middle East and Africa; and 4.2% in Asia. Unfavourable foreign currency moves also lowered Goodyear’s overall sales by 6%.
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In the three months ended June 30, 2012, the company’s sales fell 8.4%, to $5.15 billion from $5.62 billion a year earlier.
North American sales rose 1.7%, to $2.5 billion from $2.4 billion, but weak economic growth cut sales by 21.4% in Latin America; 17.9% in Europe, the Middle East and Africa; and 4.2% in Asia. Unfavourable foreign currency moves also lowered Goodyear’s overall sales by 6%.
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MAJOR DRILLING $11.01 (Toronto symbol MDI; TSINetwork Rating: Speculative) (1-866- 264-3986; www.majordrilling.com; Shares outstanding: 79.1 million; Market cap: $870.9 million; Dividend yield: 1.8%) has hiked its dividend and announced record quarterly revenue and earnings.
In the three months ended July 31, 2012, Major’s revenue jumped 44.7%, to a record $237.6 million from $164.1 million a year earlier. Earnings per share jumped 60.0%, to $0.40 from $0.25.
The strong results have prompted Major to raise its twice-yearly dividend by 11.1%, to $0.10 from $0.09. This follows a 12.5% hike in May, to $0.09 from $0.08. The stock now yields 1.8%.
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In the three months ended July 31, 2012, Major’s revenue jumped 44.7%, to a record $237.6 million from $164.1 million a year earlier. Earnings per share jumped 60.0%, to $0.40 from $0.25.
The strong results have prompted Major to raise its twice-yearly dividend by 11.1%, to $0.10 from $0.09. This follows a 12.5% hike in May, to $0.09 from $0.08. The stock now yields 1.8%.
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COMPUTER MODELLING GROUP $18.53 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 37.4 million; Market cap: $693.0 million; Dividend yield: 4.0%) sells consulting services and software that help oil and gas producers get more out of their existing wells. Computer Modelling has clients in over 50 countries.
In the three months ended June 30, 2012, the company’s revenue rose 3.3%, to $16.5 million from $15.9 million a year earlier. An increase in software licence sales more than offset a drop in consulting and professional services revenue. (It consulted on some large one-time projects in the year-earlier quarter.)
Earnings fell 8.6%, to $6.1 million, or $0.16 a share, from $6.7 million, or $0.18 a share. The company hired new employees to handle its growing business. That meant it also had to acquire more office space, computers, furniture and fixtures. It now has 164 employees, up from 144 a year ago.
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In the three months ended June 30, 2012, the company’s revenue rose 3.3%, to $16.5 million from $15.9 million a year earlier. An increase in software licence sales more than offset a drop in consulting and professional services revenue. (It consulted on some large one-time projects in the year-earlier quarter.)
Earnings fell 8.6%, to $6.1 million, or $0.16 a share, from $6.7 million, or $0.18 a share. The company hired new employees to handle its growing business. That meant it also had to acquire more office space, computers, furniture and fixtures. It now has 164 employees, up from 144 a year ago.
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