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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Pat McKeough responds to many personal questions on specific 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. Our Inner Circle Q&A frequently features questions on tech stocks. This past week, one Inner Circle member asked about a tech stock that has recently had a surge in its share price. Its unique software for submarine networks has helped this stock rise and Pat assesses whether it can sustain its momentum. ...
TEMPUR-PEDIC $25.53 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempurpedic.com; Shares outstanding: 63.5 million; Market cap: $1.6 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 70.8% since they hit an all-time high of $87.43 in April 2012.
The decline came despite a strong 2012 first quarter in which Tempur-Pedic’s earnings per share rose 26.5%, to $0.86 from $0.68 a year earlier, and sales rose 18.0%, to $384.4 million from $325.8 million.
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Tempur-Pedic’s shares are down 70.8% since they hit an all-time high of $87.43 in April 2012.
The decline came despite a strong 2012 first quarter in which Tempur-Pedic’s earnings per share rose 26.5%, to $0.86 from $0.68 a year earlier, and sales rose 18.0%, to $384.4 million from $325.8 million.
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INTUITIVE SURGICAL $549.36 (Nasdaq symbol ISRG; TSINetwork Rating: Average) (515-507-5000; www.intuitivesurgical.com; Shares outstanding: 39.7 million; Market cap: $21.8 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 March 31, 2012, Intuitive earned $143.5 million, or $3.63 a share. That’s up 37.8% from $104.1 million, or $2.66 a share, a year earlier. Revenue rose 27.6%, to $495.2 million from $388.1 million. Intuitive is debt-free, and holds cash of $2.4 billion, or $60.45 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 March 31, 2012, Intuitive earned $143.5 million, or $3.63 a share. That’s up 37.8% from $104.1 million, or $2.66 a share, a year earlier. Revenue rose 27.6%, to $495.2 million from $388.1 million. Intuitive is debt-free, and holds cash of $2.4 billion, or $60.45 a share.
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ALIMENTATION COUCHE-TARD $48.37 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 179.4 million; Market cap: $8.7 billion; Dividend yield: 0.6%) has reported sharply higher sales and earnings in the latest quarter.
In the three months ended April 29, 2012, Couche-Tard’s earnings per share rose 88.6%, to $0.66 from $0.35 a year earlier (all figures except share price in U.S. dollars).
Sales rose 28.0%, to $6.1 billion from $4.7 billion. The gains came from higher fuel prices, acquisitions and higher merchandise sales. The company gets about 30% of its sales by selling merchandise.
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In the three months ended April 29, 2012, Couche-Tard’s earnings per share rose 88.6%, to $0.66 from $0.35 a year earlier (all figures except share price in U.S. dollars).
Sales rose 28.0%, to $6.1 billion from $4.7 billion. The gains came from higher fuel prices, acquisitions and higher merchandise sales. The company gets about 30% of its sales by selling merchandise.
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WESTJET AIRLINES $16.47 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 126.2 million; Market cap: $2.1 billion; Dividend yield: 1.5%) has signed a code-sharing agreement with China Eastern Airlines, one of that country’s largest carriers.
Under these agreements, two airlines co-operate on flights and baggage handling. Code-sharing agreements are especially valuable for attracting business passengers. That’s because these agreements let customers seamlessly connect between flights and gain frequent-flyer points for the entire distance travelled.
As well, WestJet currently only has Boeing 737s in its fleet. That limits how far it can fly, so it relies on code-sharing and other agreements to attract international travellers.
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Under these agreements, two airlines co-operate on flights and baggage handling. Code-sharing agreements are especially valuable for attracting business passengers. That’s because these agreements let customers seamlessly connect between flights and gain frequent-flyer points for the entire distance travelled.
As well, WestJet currently only has Boeing 737s in its fleet. That limits how far it can fly, so it relies on code-sharing and other agreements to attract international travellers.
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DUNDEE REIT $39.04 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 96.5 million; Market cap: $3.8 billion; Dividend yield: 5.6%) aims to sell off its industrial properties over the next 18 months, to focus on adding to its office properties.
Right now, Dundee owns 22.5 million square feet of office space across 175 properties and 5.7 million square feet of industrial space across 74 properties. The REIT’s industrial holdings contribute about 8% of its revenue. Dundee spent a total of $1.6 billion on property purchases in 2011, up from $900 million in 2010.
The trust’s growth-by-acquisition strategy adds risk, but it is steadily diversifying its holdings outside western Canada by purchasing more buildings in other parts of the country. At the start of 2010, about 70% of Dundee’s properties were in western Canada. That’s now down to less than 55%.
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Right now, Dundee owns 22.5 million square feet of office space across 175 properties and 5.7 million square feet of industrial space across 74 properties. The REIT’s industrial holdings contribute about 8% of its revenue. Dundee spent a total of $1.6 billion on property purchases in 2011, up from $900 million in 2010.
The trust’s growth-by-acquisition strategy adds risk, but it is steadily diversifying its holdings outside western Canada by purchasing more buildings in other parts of the country. At the start of 2010, about 70% of Dundee’s properties were in western Canada. That’s now down to less than 55%.
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ADOBE SYSTEMS $31.43 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 491.8 million; Market cap: $15.5 billion; No dividends paid) is teaming up with NBC to stream events live from the Olympic Summer Games in London to mobile device users in the U.S. for free. Comcast Corp. owns NBC, which has the U.S. television rights to the London Olympics.
NBC has launched two applications using Adobe technology. Both include software that measures user traffic and offers targeted advertising.
The first app, NBC Olympics Live Extra, will let customers of cable, satellite and telephone companies live-stream competitions and events. The other app, called NBC Olympics, will provide additional information, such as TV and online schedules, live results and highlights.
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NBC has launched two applications using Adobe technology. Both include software that measures user traffic and offers targeted advertising.
The first app, NBC Olympics Live Extra, will let customers of cable, satellite and telephone companies live-stream competitions and events. The other app, called NBC Olympics, will provide additional information, such as TV and online schedules, live results and highlights.
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AMAZON.COM $217.47 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206- 266-1000; www.amazon.com; Shares outstanding: 450.5 million; Market cap: $98.0 billion; No dividends paid) has reportedly agreed to buy 3-D mapping company UpNext.
UpNext offers interactive, threedimensional maps. Users can “drop down” into streets and tap objects to bring up information, directions or different viewpoints.
Offering its own mapping capability through UpNext will let Amazon take full advantage of rising demand for mobile ads. As well, the company may be working on a smartphone, and it could use UpNext on that device.
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UpNext offers interactive, threedimensional maps. Users can “drop down” into streets and tap objects to bring up information, directions or different viewpoints.
Offering its own mapping capability through UpNext will let Amazon take full advantage of rising demand for mobile ads. As well, the company may be working on a smartphone, and it could use UpNext on that device.
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FIRSTSERVICE CORP. $27.65 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 28.7 million; Market cap: $793.6 million; No dividends paid) serves the following areas of the real estate market: commercial real estate, residential property management, and property improvement. FirstService has more than 23,000 employees worldwide.
FirstService’s revenue rose 2.4% in the three months ended March 31, 2012, to $490.1 million from $478.4 million a year earlier (all figures except share price in U.S. dollars). Excluding one-time items, the company lost $0.10 a share, compared to a profit of $0.14 a share.
Revenue increased at two of FirstService’s three divisions: commercial real estate (up 9%) and residential property management (up 14%).
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FirstService’s revenue rose 2.4% in the three months ended March 31, 2012, to $490.1 million from $478.4 million a year earlier (all figures except share price in U.S. dollars). Excluding one-time items, the company lost $0.10 a share, compared to a profit of $0.14 a share.
Revenue increased at two of FirstService’s three divisions: commercial real estate (up 9%) and residential property management (up 14%).
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REITMANS (CANADA) LTD. $11.97 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384-1140; www.reitmans.com; Shares outstanding: 65.5 million; Market cap: $784.0 million; Dividend yield: 6.7%) owns 925 women’s clothing stores across Canada.
The chain consists of 364 Reitmans, 154 Penningtons, 153 Smart Set, 114 Addition Elle, 74 Thyme Maternity and 66 RW & Co. stores.
In the three months ended April 28, 2012, Reitmans lost $53,000, or nil per share, compared to a profit of $624,000, or $0.01 a share, a year earlier. The company’s sales were down 1.0%, to $217.1 million from $219.3 million. Same-store sales declined 0.7%.
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The chain consists of 364 Reitmans, 154 Penningtons, 153 Smart Set, 114 Addition Elle, 74 Thyme Maternity and 66 RW & Co. stores.
In the three months ended April 28, 2012, Reitmans lost $53,000, or nil per share, compared to a profit of $624,000, or $0.01 a share, a year earlier. The company’s sales were down 1.0%, to $217.1 million from $219.3 million. Same-store sales declined 0.7%.
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