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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GOODYEAR TIRE & RUBBER CO. $11.65 (New York symbol GT; TSINetwork Rating: Extra Risk) (330 -796-2122; www.goodyear.com; Shares outstanding: 244.7 million; Market cap: $2.9 billion; No dividends paid) has announced a major expansion of its global off-the-road (OTR) tire business: The company has acquired 100% of its Nippon Giant Tire subsidiary in Japan. (OTR tires are used for heavy equipment.)
Goodyear now plans to spend $250 million to upgrade and expand Nippon Giant Tire’s manufacturing facility. When these improvements are completed, the plant will be able to make a complete line of 57-inch tires, as well as 63-inch tires at a future date.
OTR tire demand is growing rapidly in the mining and road construction industries, and this expansion will let Goodyear tap into that growth. It will also help the company grow further in the Asia-Pacific region, primarily in Australia, which is one of the world’s largest markets for OTR tires.
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Goodyear now plans to spend $250 million to upgrade and expand Nippon Giant Tire’s manufacturing facility. When these improvements are completed, the plant will be able to make a complete line of 57-inch tires, as well as 63-inch tires at a future date.
OTR tire demand is growing rapidly in the mining and road construction industries, and this expansion will let Goodyear tap into that growth. It will also help the company grow further in the Asia-Pacific region, primarily in Australia, which is one of the world’s largest markets for OTR tires.
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FAIRFAX FINANCIAL HOLDINGS $392.57 (Toronto symbol FFH: TSINetwork Rating: Average) (416-367-2612; www.fairfax.ca; Shares outstanding: 19.9 million; Market cap: $7.8 billion; Dividend yield: 2.5%) has agreed to buy 77% of Thomas Cook (India) Ltd., a publicly traded company that sells travel, insurance and foreign exchange services in India.
Fairfax is buying this stake from struggling U.K.- based parent company Thomas Cook Group plc for $150 million U.S.
This investment should help Fairfax profit from increasing business travel to India.
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Fairfax is buying this stake from struggling U.K.- based parent company Thomas Cook Group plc for $150 million U.S.
This investment should help Fairfax profit from increasing business travel to India.
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CHESAPEAKE ENERGY $19.04 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848 -8000; www.chkenergy.com; Shares outstanding: 662.3 million; Market cap: $12.6 billion; Dividend yield: 1.8%) has moved up from its low of $13.32 in mid-May. That’s mainly because activist investor Carl Icahn has gotten involved in the company’s restructuring. Icahn, who has a long history of pushing companies to make changes that increase shareholder value, has acquired a 7.6% stake in Chesapeake.
Pressure from Icahn has already prompted Chesapeake to announce that it will replace four of its eight board members with nominees of its largest shareholders—Icahn and Southeastern Asset Management Inc., which holds a 13.6% stake.
Icahn now plans to push for cost-cutting measures and a more conservative approach to spending. His proposals will likely include cutting drilling budgets and selling certain pipelines and gas-processing plants.
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Pressure from Icahn has already prompted Chesapeake to announce that it will replace four of its eight board members with nominees of its largest shareholders—Icahn and Southeastern Asset Management Inc., which holds a 13.6% stake.
Icahn now plans to push for cost-cutting measures and a more conservative approach to spending. His proposals will likely include cutting drilling budgets and selling certain pipelines and gas-processing plants.
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CAMECO CORP. $21.63 (Toronto symbol CCO; TSINetwork Rating: Extra Risk) (306- 956-6200; www.cameco.com; Shares outstanding: 395.3 million; Market cap: $8.6 billion; Dividend yield 0.7%) is buying Germany-based nuclear fuel broker Nukem Energy for $300 million.
Nukem acts as an intermediary between uranium buyers and sellers. It also sells uranium from two different sources: it has 4.5 million pounds recycled from dismantled Russian nuclear weapons, as well as newly mined uranium from mines in Uzbekistan.
Adding Nukem raises Cameco’s share of the global uranium market to 25% from 18%.
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Nukem acts as an intermediary between uranium buyers and sellers. It also sells uranium from two different sources: it has 4.5 million pounds recycled from dismantled Russian nuclear weapons, as well as newly mined uranium from mines in Uzbekistan.
Adding Nukem raises Cameco’s share of the global uranium market to 25% from 18%.
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NEW GOLD $10.16 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 461.7 million; Market cap: $4.7 billion; No dividends paid) has three operating mines: the Mesquite mine in the U.S., the Cerro San Pedro mine in Mexico and the Peak mine in Australia. It also owns 30% of the El Morro copper/gold project in Chile (Goldcorp owns the other 70%) and 100% of the New Afton gold/copper/silver project in B.C.
El Morro contains an estimated 4.7 million ounces of gold and 3.7 billion pounds of copper. New Afton holds 2.7 million ounces of gold, 2.5 billion pounds of copper and 8.3 million ounces of silver.
New Gold also owns the Blackwater property in central B.C., which could hold as much as 7.8 million ounces of gold.
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El Morro contains an estimated 4.7 million ounces of gold and 3.7 billion pounds of copper. New Afton holds 2.7 million ounces of gold, 2.5 billion pounds of copper and 8.3 million ounces of silver.
New Gold also owns the Blackwater property in central B.C., which could hold as much as 7.8 million ounces of gold.
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YAMANA GOLD $16.36 (Toronto symbol YRI; TSINetwork Rating: Speculative) (416-815-0220; www.yamana.com; Shares outstanding: 746.0 million; Market cap: $12.2 billion; Dividend yield: 1.3%) owns seven operating gold mines in Mexico, Brazil, Chile and Argentina. It also holds a 12.5% stake in the Alumbrera copper/gold mine in Argentina, and has three other properties in advanced stages of development.
In the quarter ended March 31, 2012, Yamana’s revenue rose 17.6%, to $559.7 million from $476.1 million a year earlier (all figures except share price and market cap in U.S. dollars). The company increased its production and benefited from higher gold prices. Earnings per share rose 19.0%, to $0.25 from $0.21.
Yamana held a high cash balance of $867.6 million, or $1.16 a share, on March 31. Its $766.0 million of debt is just 6.3% of its market cap. Thanks to the improved results, the company is raising its quarterly dividend by 18.2% with the July 2012 payment, to $0.065 from $0.055. The shares now yield 1.3%.
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In the quarter ended March 31, 2012, Yamana’s revenue rose 17.6%, to $559.7 million from $476.1 million a year earlier (all figures except share price and market cap in U.S. dollars). The company increased its production and benefited from higher gold prices. Earnings per share rose 19.0%, to $0.25 from $0.21.
Yamana held a high cash balance of $867.6 million, or $1.16 a share, on March 31. Its $766.0 million of debt is just 6.3% of its market cap. Thanks to the improved results, the company is raising its quarterly dividend by 18.2% with the July 2012 payment, to $0.065 from $0.055. The shares now yield 1.3%.
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LEON’S FURNITURE $10.95 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 69.9 million; Market cap: $765.4 million; Dividend yield: 3.7%) reports that its sales rose 4.4% in the quarter ended March 31, 2012, to $157.4 million from $150.8 million a year earlier. However, earnings fell 16.5%, to $8.6 million, or $0.12 a share. A year earlier, the company earned $10.3 million, or $0.15 a share.
Leon’s spent more on marketing in the latest quarter, and it had to deduct some expenses left over from its opening of four new stores late last year.
Leon’s plans to continue its expansion by opening roughly five new stores a year over the next five years.
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Leon’s spent more on marketing in the latest quarter, and it had to deduct some expenses left over from its opening of four new stores late last year.
Leon’s plans to continue its expansion by opening roughly five new stores a year over the next five years.
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TIM HORTONS $54.48 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 155.8 million; Market cap: $8.5 billion; Dividend yield: 1.6%) operates 3,295 coffee-and-donut shops in Canada and 714 in the U.S.
The company earned $0.56 a share in the three months ended April 1, 2012. That’s up 16.7% from $0.48 a share a year earlier.
Sales rose 12.1%, to $721.3 million from $643.5 million. Tim Hortons opened 22 outlets in Canada and seven in the U.S. during the quarter. Same-store sales (which exclude new outlets) rose 8.5% in the U.S. and 5.2% in Canada.
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The company earned $0.56 a share in the three months ended April 1, 2012. That’s up 16.7% from $0.48 a share a year earlier.
Sales rose 12.1%, to $721.3 million from $643.5 million. Tim Hortons opened 22 outlets in Canada and seven in the U.S. during the quarter. Same-store sales (which exclude new outlets) rose 8.5% in the U.S. and 5.2% in Canada.
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CALIAN TECHNOLOGIES $20.20 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 7.7 million; Market cap: $155.5 million; Dividend yield: 5.2%) 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 March 31, 2012, Calian’s revenue rose 3.7%, to $61.6 million from $59.4 million a year earlier. Earnings rose 12.8%, to $3.7 million, or $0.48 a share, from $3.3 million, or $0.42 a share.
Just before the quarter ended, Calian bought Primacy Management Inc., of Burlington, Ontario. 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 March 31, 2012, Calian’s revenue rose 3.7%, to $61.6 million from $59.4 million a year earlier. Earnings rose 12.8%, to $3.7 million, or $0.48 a share, from $3.3 million, or $0.42 a share.
Just before the quarter ended, Calian bought Primacy Management Inc., of Burlington, Ontario. 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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FORTRESS PAPER $19.87 (Toronto symbol FTP; TSINetwork Rating: Extra Risk) (1-888-820-3888; www.fortresspaper.com; Shares outstanding: 14.3 million; Market cap: $284.1 million; No dividends paid) has moved up over 20% since early June, mostly on a couple of positive developments.
First, Fortress’s facility in Thurso, Quebec, which it bought in early 2010, is now operating at 92% capacity. The pulp is meeting customer specifications, and shipments to China are increasing.
Second, the company’s Landqart banknote division in Switzerland has announced that a customer has reinstated a significant order that had been postponed. That should take up the excess capacity at the plant.
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First, Fortress’s facility in Thurso, Quebec, which it bought in early 2010, is now operating at 92% capacity. The pulp is meeting customer specifications, and shipments to China are increasing.
Second, the company’s Landqart banknote division in Switzerland has announced that a customer has reinstated a significant order that had been postponed. That should take up the excess capacity at the plant.
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