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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SHERRITT INTERNATIONAL $4.54 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.7 million; Market cap: $1.3 billion; Dividend yield: 3.4%) reports that its revenue fell 2.5% in the three months ended June 30, 2012, to $487.9 million from $500.6 million a year earlier. Cash flow fell 10.7%, to $81.6 million, or $0.28 a share, from $91.4 million, or $0.31 a share.
Lower nickel prices and a drop in thermal coal sales were the main reasons for the declines.
The company is Cuba’s largest foreign investor; its Cuban operations account for the majority of its revenue and earnings. The country’s uncertain political and economic situation adds to the stock’s risk. However, Sherritt is diversifying away from Cuba by investing in other countries.
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Lower nickel prices and a drop in thermal coal sales were the main reasons for the declines.
The company is Cuba’s largest foreign investor; its Cuban operations account for the majority of its revenue and earnings. The country’s uncertain political and economic situation adds to the stock’s risk. However, Sherritt is diversifying away from Cuba by investing in other countries.
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ZARGON OIL & GAS $8.99 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 29.6 million; Market cap: $266.1 million; Dividend yield: 8.0%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. Its production is 65% oil and 35% gas.
In the three months ended June 30, 2012, Zargon produced 8,290 barrels of oil equivalent per day, down 4.6% from 8,686 barrels a year earlier. That’s because the company sold some less-important properties and cut back on natural gas drilling in light of low gas prices. The production drop pushed down Zargon’s cash flow per share by 12.5%, to $0.42 from $0.48 a year earlier.
The company continues to successfully drill horizontal wells in the Alberta Plains North area. Horizontal drilling involves drilling development wells sideways or at an angle to reach isolated pockets of gas or to follow a reservoir spread out in a narrow layer. Horizontal drilling can work well in places where conventional drilling is impossible or too expensive.
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In the three months ended June 30, 2012, Zargon produced 8,290 barrels of oil equivalent per day, down 4.6% from 8,686 barrels a year earlier. That’s because the company sold some less-important properties and cut back on natural gas drilling in light of low gas prices. The production drop pushed down Zargon’s cash flow per share by 12.5%, to $0.42 from $0.48 a year earlier.
The company continues to successfully drill horizontal wells in the Alberta Plains North area. Horizontal drilling involves drilling development wells sideways or at an angle to reach isolated pockets of gas or to follow a reservoir spread out in a narrow layer. Horizontal drilling can work well in places where conventional drilling is impossible or too expensive.
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BIRCHCLIFF ENERGY $7.00 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 141.4 million; Market cap: $989.8 million; No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 75% of Birchcliff’s production is natural gas. The remaining 25% is oil.
Prominent Toronto investor Seymour Schulich is the company’s largest shareholder; he owns about 28% of its outstanding shares.
In the three months ended June 30, 2012, Birchcliff’s production rose 27.2%, to 22,039 barrels of oil equivalent per day (including natural gas) from 17,324 barrels a year earlier.
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Prominent Toronto investor Seymour Schulich is the company’s largest shareholder; he owns about 28% of its outstanding shares.
In the three months ended June 30, 2012, Birchcliff’s production rose 27.2%, to 22,039 barrels of oil equivalent per day (including natural gas) from 17,324 barrels a year earlier.
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THE CHURCHILL CORP. $8.16 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.4 million; Market cap: $199.1 million; Dividend yield: 5.9%) is down 32% from mid-July after it reported a $0.17-a-share loss in the quarter ended June 30, 2012.
The loss is mainly the result of project delays. Higher-than-expected rainfall slowed work on its Calgary Airport runway project and a housing development in Saskatoon. As well, construction of Winnipeg’s new football stadium was stalled because subcontractors failed to deliver steel structures on time.
Despite this setback, Churchill’s long-term prospects remain sound. Meanwhile, its dividend, which yields a high 5.9%, looks safe.
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The loss is mainly the result of project delays. Higher-than-expected rainfall slowed work on its Calgary Airport runway project and a housing development in Saskatoon. As well, construction of Winnipeg’s new football stadium was stalled because subcontractors failed to deliver steel structures on time.
Despite this setback, Churchill’s long-term prospects remain sound. Meanwhile, its dividend, which yields a high 5.9%, looks safe.
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ENERFLEX LTD., $12.39 (Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 77.6 million; Market cap: $961.5 million; Dividend yield: 1.9%) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration equipment and power generators.
The company has a strong position in three of the world’s fast-growing markets: U.S. and Canadian shale gas production; Australian natural gas from coal beds; and conventional Middle Eastern natural gas, which is converted to liquefied natural gas (LNG) for shipping. Natural gas prices are at 10-year lows, but companies continue to increase their drilling and production.
In the quarter ended June 30, 2012, Enerflex’s revenue jumped 43.9%, to $354.6 million from $246.5 million a year ago. Strong demand from customers in the southern U.S. and South America pushed sales higher.
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The company has a strong position in three of the world’s fast-growing markets: U.S. and Canadian shale gas production; Australian natural gas from coal beds; and conventional Middle Eastern natural gas, which is converted to liquefied natural gas (LNG) for shipping. Natural gas prices are at 10-year lows, but companies continue to increase their drilling and production.
In the quarter ended June 30, 2012, Enerflex’s revenue jumped 43.9%, to $354.6 million from $246.5 million a year ago. Strong demand from customers in the southern U.S. and South America pushed sales higher.
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TOROMONT INDUSTRIES LTD. $21.10 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 76.4 million; Market cap: $1.6 billion; Dividend yield: 2.3%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. Toromont also makes refrigeration systems through its CIMCO division.
In July 2011, the company completed the spinoff of Enerflex Ltd. (see below). Shareholders received shares of the new Toromont and shares of Enerflex.
In the three months ended June 30, 2012, higher equipment sales and rentals, particularly to mining customers, pushed up Toromont’s revenue by 10.1%, to $379.6 million from $344.6 million a year earlier. Without one-time items, earnings per share rose 9.7% to $0.34 from $0.31, on the higher sales and improved profit margins.
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In July 2011, the company completed the spinoff of Enerflex Ltd. (see below). Shareholders received shares of the new Toromont and shares of Enerflex.
In the three months ended June 30, 2012, higher equipment sales and rentals, particularly to mining customers, pushed up Toromont’s revenue by 10.1%, to $379.6 million from $344.6 million a year earlier. Without one-time items, earnings per share rose 9.7% to $0.34 from $0.31, on the higher sales and improved profit margins.
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AEROPOSTALE INC. $13.63 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 81.3 million; Market cap: $1.1 billion; No dividends paid) is down almost 32% since early August after it lowered its forecast for its fiscal 2012 second quarter.
The company now expects to break even, down from its previous forecast of a profit of $0.03 to $0.05 a share. Consensus estimates were for a $0.06-a-share profit.
Aeropostale operates in a highly competitive market. That means it has to constantly refresh its clothing lines with popular new colours and styles. It should be able to repeat its past success at attracting customers, but sales may remain weak in the near term.
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The company now expects to break even, down from its previous forecast of a profit of $0.03 to $0.05 a share. Consensus estimates were for a $0.06-a-share profit.
Aeropostale operates in a highly competitive market. That means it has to constantly refresh its clothing lines with popular new colours and styles. It should be able to repeat its past success at attracting customers, but sales may remain weak in the near term.
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BMTC GROUP $16.90 (Toronto symbol GBT.A; TSINetwork Rating: Extra Risk) (514-648-5757; No website; Shares outstanding: 47.5 million; Market cap: $802.8 million; Dividend yield: 1.4%) is one of Quebec’s largest retailers of furniture, electronics and household appliances. It sells these products through its two affiliates: Brault & Martineau Inc. and Ameublements Tanguay.
The company has 20 large stores in the Montreal, Quebec City, Repentigny, Laval, Saint-Georges, Chicoutimi, Sainte-Therese, Trois-Rivieres, Sherbrooke, Rimouski, Riviere-du-Loup and Gatineau areas. It also has six liquidation centres and six Sleep Gallery stores.
In July 2012, BMTC opened a new store in Levis to replace the old one. The company is also building a warehouse-style outlet in St-Hubert that will offer lower-priced products and operate under a new banner—EconoMax.
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The company has 20 large stores in the Montreal, Quebec City, Repentigny, Laval, Saint-Georges, Chicoutimi, Sainte-Therese, Trois-Rivieres, Sherbrooke, Rimouski, Riviere-du-Loup and Gatineau areas. It also has six liquidation centres and six Sleep Gallery stores.
In July 2012, BMTC opened a new store in Levis to replace the old one. The company is also building a warehouse-style outlet in St-Hubert that will offer lower-priced products and operate under a new banner—EconoMax.
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LEON’S FURNITURE LTD. $11.50 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.0 million; Market cap: $805.0 million; Dividend yield: 3.5%) has built its chain of over 76 furniture stores on its four main strengths: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; strong after-sales service; and aggressive TV, radio and print advertising.
In the three months ended June 30, 2012, Leon’s sales fell 1.1%, to $162.1 million from $163.9 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales.
Earnings fell 19.8%, to $9.0 million, or $0.13 a share, from $11.2 million, or $0.16 a share. The slower sales were the main reason for the earnings decline. The company also spent more on advertising.
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In the three months ended June 30, 2012, Leon’s sales fell 1.1%, to $162.1 million from $163.9 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales.
Earnings fell 19.8%, to $9.0 million, or $0.13 a share, from $11.2 million, or $0.16 a share. The slower sales were the main reason for the earnings decline. The company also spent more on advertising.
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ALARMFORCE INDUSTRIES $11.22 (Toronto symbol AF; TSINetwork Rating: Speculative) (1-800-267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $136.9 million; Dividend yield: 0.9%) has jumped 26% since the start of August after it announced that it is launching a strategic review of its business, including a possible sale of the company.
AlarmForce is increasing its advertising as it expands into the U.S. It’s also investing more in its VideoRelay system, which it launched in October 2011.
VideoRelay lets subscribers watch their homes through their computers and smartphones. Users can either view live video or receive alerts when the system detects motion. It also lets them establish two-way voice communication through the camera.
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AlarmForce is increasing its advertising as it expands into the U.S. It’s also investing more in its VideoRelay system, which it launched in October 2011.
VideoRelay lets subscribers watch their homes through their computers and smartphones. Users can either view live video or receive alerts when the system detects motion. It also lets them establish two-way voice communication through the camera.
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