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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There is a history of Canadian consumer stocks trying, and failing, to establish a presence in the United States. But there are several outstanding success stories, such as Alimentation Couche-Tard (Toronto symbol ATD.B) our #1 Stock for 2012, which has profited extensively from its convenience stores and gas bars in the U.S. A new partnership initiative in the U.S. by Reitmans is on a more modest scale than Couche-Tard’s operations, but the women’s wear retailer is looking for a welcome boost in sales. REITMANS (CANADA) LTD. (Toronto symbol RET.A; www.reitmans.com) 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....
AMERICAN EXPRESS CO. $56 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.1 billion; Market cap: $61.6 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.4%; TSINetwork Rating: Average; www.americanexpress.com) is best known for its American Express charge and credit cards. It also sells travel-related services, such as hotel bookings, insurance and traveller’s cheques.
Amex gets most of its revenue from the fees it charges merchants who accept its cards. It also earns interest on the outstanding balances of its cardholders. Being a lender adds to its risk, particularly if cardholders fall behind on their payments and Amex has to write off these loans.
However, Amex clients tend to have above-average incomes and good credit histories. The company has also tightened its lending policies in the past few years.
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Amex gets most of its revenue from the fees it charges merchants who accept its cards. It also earns interest on the outstanding balances of its cardholders. Being a lender adds to its risk, particularly if cardholders fall behind on their payments and Amex has to write off these loans.
However, Amex clients tend to have above-average incomes and good credit histories. The company has also tightened its lending policies in the past few years.
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GENERAL ELECTRIC CO. $20 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.6 billion; Market cap: $212.0 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.ge.com) plans to split its energy-products division into three new businesses: GE Power and Water (turbines, generators); GE Oil and Gas (products for onshore and offshore energy producers); and GE Energy Management (power-transmission equipment).
This reorganization should make it easier for these new divisions to take advantage of new opportunities. It should also save GE $200 million to $300 million by 2014.
To put these savings in context, GE earned $4.0 billion in the three months ended June 30, 2012. That’s up 6.9% from $3.75 billion a year earlier. Earnings per share rose 11.8%, to $0.38 from $0.34, on fewer shares outstanding. Revenue rose 2.5%, to $36.5 billion from $35.6 billion.
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This reorganization should make it easier for these new divisions to take advantage of new opportunities. It should also save GE $200 million to $300 million by 2014.
To put these savings in context, GE earned $4.0 billion in the three months ended June 30, 2012. That’s up 6.9% from $3.75 billion a year earlier. Earnings per share rose 11.8%, to $0.38 from $0.34, on fewer shares outstanding. Revenue rose 2.5%, to $36.5 billion from $35.6 billion.
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CEDAR FAIR L.P. $32 (New York symbol FUN; Income Portfolio, Consumer sector; Units outstanding: 55.5 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 5.0%; TSINetwork Rating: Average; www.cedarfair.com) reported revenue of $456 million from the beginning of the year through the July 4th holiday weekend. That’s up 4.6%, from the same period in 2011.
New rides and attractions are helping Cedar Fair draw more visitors to its 11 amusement parks and seven water parks. Overall attendance rose 2%, while average spending per guest gained 4%. Revenue at its five hotels also rose 2%.
Cedar Fair is a buy.
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New rides and attractions are helping Cedar Fair draw more visitors to its 11 amusement parks and seven water parks. Overall attendance rose 2%, while average spending per guest gained 4%. Revenue at its five hotels also rose 2%.
Cedar Fair is a buy.
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MACY’S INC. $35 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 413.2 million; Market cap: $14.6 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.3%; TSINetwork Rating: Average; www.macysinc.com) reported lower-than-expected sales at its 840 department stores for June 2012.
During the month, same-store sales rose 1.2% from June 2011. That missed the consensus estimate of a 1.9% increase. The weaker U.S. economy has hurt consumer spending. As well, renovations have cut sales at its flagship store in New York City.
However, the company’s websites continue to grow strongly: online sales jumped 31.8% in June 2012. Moreover, Macy’s still expects its same-store sales to rise 3.7% for its full fiscal year, which ends January 31, 2013.
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During the month, same-store sales rose 1.2% from June 2011. That missed the consensus estimate of a 1.9% increase. The weaker U.S. economy has hurt consumer spending. As well, renovations have cut sales at its flagship store in New York City.
However, the company’s websites continue to grow strongly: online sales jumped 31.8% in June 2012. Moreover, Macy’s still expects its same-store sales to rise 3.7% for its full fiscal year, which ends January 31, 2013.
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CINTAS CORP. $38 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 126.5 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.4%; TSINetwork Rating: Average; www.cintas.com) earned $297.6 million in its 2012 fiscal year, which ended May 31, 2012. That’s up 20.5% from $247.0 million in 2011. Earnings per share jumped 35.1%, to $2.27 from $1.68, on fewer shares outstanding.
Revenue rose 7.7% in 2012, to a record $4.1 billion from $3.8 billion. If you exclude contributions from acquisitions, revenue still rose 6.1%.
The company continues to see rising demand for the uniforms and services, such as document shredding, that it sells to businesses. It is also doing a good job of controlling its costs.
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Revenue rose 7.7% in 2012, to a record $4.1 billion from $3.8 billion. If you exclude contributions from acquisitions, revenue still rose 6.1%.
The company continues to see rising demand for the uniforms and services, such as document shredding, that it sells to businesses. It is also doing a good job of controlling its costs.
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INTEL CORP. $25 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.0 billion; Market cap: $125.0 billion; Price-to-sales ratio: 2.3; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.intel.com) saw its revenue rise 3.6% in the three months ended June 30, 2012, to $13.5 billion from $13.0 billion a year earlier. However, earnings fell 5.0%, to $3.0 billion from $3.1 billion. Earnings per share were unchanged at $0.57, due to fewer shares outstanding.
The company continues to invest heavily in new plants and chipmaking technology. That has hurt its earnings, but these investments will help Intel sell more chips to makers of tablet computers and other mobile devices. Intel’s advanced technologies will also give it an edge over other chipmakers.
Intel is a buy.
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The company continues to invest heavily in new plants and chipmaking technology. That has hurt its earnings, but these investments will help Intel sell more chips to makers of tablet computers and other mobile devices. Intel’s advanced technologies will also give it an edge over other chipmakers.
Intel is a buy.
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HONDA MOTOR CO. LTD. ADRs $30 (New York symbol HMC; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.8 billion; Market cap: $54.0 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.honda.com) is Japan’s second-largest carmaker and the world’s biggest motorcycle manufacturer.
Honda’s car sales fell 10.7% in fiscal 2012, which ended March 31, 2012, to 3.1 million vehicles from 3.5 million in 2011. However, motorcycle volumes rose 9.7%, to 12.6 million from 11.4 million.
The lower car volumes pushed down revenue by 9.8%, to $96.9 billion from $107.4 billion. As well, earnings fell 59.8%, to $2.6 billion, or $1.49 per ADR (each American Depositary Receipt represents one Honda common share). Honda earned $6.4 billion, or $3.55 per ADR, in 2011.
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Honda’s car sales fell 10.7% in fiscal 2012, which ended March 31, 2012, to 3.1 million vehicles from 3.5 million in 2011. However, motorcycle volumes rose 9.7%, to 12.6 million from 11.4 million.
The lower car volumes pushed down revenue by 9.8%, to $96.9 billion from $107.4 billion. As well, earnings fell 59.8%, to $2.6 billion, or $1.49 per ADR (each American Depositary Receipt represents one Honda common share). Honda earned $6.4 billion, or $3.55 per ADR, in 2011.
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TOYOTA MOTOR CO. ADRs $73 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.7 billion; Market cap: $124.1 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.toyota.com) recently passed General Motors as the world’s largest carmaker based on sales.
Toyota sold 7.35 million vehicles in its 2012 fiscal year, which ended March 31, 2012. That’s up 0.6% from 7.31 million vehicles in 2011. The higher sales pushed up its revenue by 3.5%, to $236.4 billion from $228.4 billion. Earnings rose 19.6%, to $3.5 billion from $3.0 billion. Because of more shares outstanding, earnings per ADR rose at a slower pace of 12.2%, to $2.12 from $1.89. (Each American Depositary Receipt represents two Toyota common shares.)
Toyota is launching new versions of its popular models. That should push up its sales to 8.7 million vehicles in fiscal 2013.
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Toyota sold 7.35 million vehicles in its 2012 fiscal year, which ended March 31, 2012. That’s up 0.6% from 7.31 million vehicles in 2011. The higher sales pushed up its revenue by 3.5%, to $236.4 billion from $228.4 billion. Earnings rose 19.6%, to $3.5 billion from $3.0 billion. Because of more shares outstanding, earnings per ADR rose at a slower pace of 12.2%, to $2.12 from $1.89. (Each American Depositary Receipt represents two Toyota common shares.)
Toyota is launching new versions of its popular models. That should push up its sales to 8.7 million vehicles in fiscal 2013.
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IDEXX LABORATORIES INC. $88 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 56.9 million; Market cap: $5.0 billion; Price-to-sales ratio: 3.9; No dividends paid; TSINetwork Rating: Average; www.idexx.com) gets 80% of its revenue by making equipment that veterinarians use to detect diseases in pets.
The company also makes systems that detect contaminants in livestock and water (20% of revenue). It sells its products in over 100 countries.
In the three months ended June 30, 2012, Idexx earned $51.3 million. That’s up 5.5% from $48.7 million a year earlier. The company spent $27.4 million on share repurchases in the latest quarter. Due to fewer shares outstanding, earnings per share rose 9.6%, to $0.91 from $0.83. Revenue rose 5.6%, to $335.6 million from $317.9 million.
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The company also makes systems that detect contaminants in livestock and water (20% of revenue). It sells its products in over 100 countries.
In the three months ended June 30, 2012, Idexx earned $51.3 million. That’s up 5.5% from $48.7 million a year earlier. The company spent $27.4 million on share repurchases in the latest quarter. Due to fewer shares outstanding, earnings per share rose 9.6%, to $0.91 from $0.83. Revenue rose 5.6%, to $335.6 million from $317.9 million.
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