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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CHESAPEAKE ENERGY $14.04 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 659.3 million; Market cap: $9.3 billion; Dividend yield: 2.5%) is down 60.7% from its high of $35.75 last August. That’s largely because natural gas prices have fallen to near 10-year lows.
However, the drop has accelerated lately, partly on news that the company’s cofounder, CEO and chairman, Aubrey K. McClendon, took out loans that may have put him in a conflict of interest. It has also come to light that he ran a hedge fund between 2004 and 2008 that traded in the same commodities that Chesapeake produces.
The U.S. Securities and Exchange Commission (SEC) is investigating.
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However, the drop has accelerated lately, partly on news that the company’s cofounder, CEO and chairman, Aubrey K. McClendon, took out loans that may have put him in a conflict of interest. It has also come to light that he ran a hedge fund between 2004 and 2008 that traded in the same commodities that Chesapeake produces.
The U.S. Securities and Exchange Commission (SEC) is investigating.
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AASTRA TECHNOLOGIES $18.60 (Toronto symbol AAH; TSINetwork Rating: Speculative) (905- 760-4200; www.aastra.com; Shares outstanding: 11.9 million; Market cap: $221.3 million; Dividend yield: 4.3%) reported 9.5% lower sales in the three months ended March 31, 2012, to $147.3 million from $162.7 million a year earlier. Sales declined in all regions, including Western Europe, where Aastra gets the majority of its revenue. Even so, its earnings rose sharply, to $2 million, or $0.14 a share, from $184,000, or $0.01 a share.
Aastra needs a sustained economic recovery in Europe to raise its sales and further push up its earnings. Still, the stock trades at just 10.6 times the $1.76 a share that the company should earn in 2012. The shares yield 4.3%.
Aastra is a buy for aggressive investors.
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Aastra needs a sustained economic recovery in Europe to raise its sales and further push up its earnings. Still, the stock trades at just 10.6 times the $1.76 a share that the company should earn in 2012. The shares yield 4.3%.
Aastra is a buy for aggressive investors.
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ENDEAVOUR SILVER $7.67 (Toronto symbol EDR; TSINetwork Rating: Speculative) (1-877-685-9775; www.edrsilver.com; Shares outstanding: 87.8 million; Market cap: $673. million; No dividends paid) operates the Guanacevi and Guanajuato silver/gold mines in Mexico.
Endeavour is now buying two more properties in Mexico, the El Cubo mine and the Guadalupe y Calvo exploration project, from AuRico Gold (symbol AUQ on Toronto). Endeavour will pay $100 million in cash and $100 million in stock.
Under the deal, AuRico is also entitled to an additional $50 million in cash payments if certain events occur during the first three years after the sale closes.
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Endeavour is now buying two more properties in Mexico, the El Cubo mine and the Guadalupe y Calvo exploration project, from AuRico Gold (symbol AUQ on Toronto). Endeavour will pay $100 million in cash and $100 million in stock.
Under the deal, AuRico is also entitled to an additional $50 million in cash payments if certain events occur during the first three years after the sale closes.
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INTUITIVE SURGICAL $537.18 (Nasdaq symbol ISRG; TSINetwork Rating: Average) (515-507-5000; www.intuitivesurgical.com; Shares outstanding: 39.7 million; Market cap: $21.3 billion; No dividends paid) earned $143.5 million, or $3.63 a share, in the three months ended March 31, 2012. That’s up sharply from $104.2 million, or $2.66 a share, a year earlier. Revenue rose 27.6%, to $495.2 million from $388.1 million.
Revenue from replenishable supplies rose 32.0%. Intuitive gets almost 40% of its revenue from steady sales of replacement parts, training and other services. That cuts its risk. The company is debt-free, and holds cash of $2.4 billion, or $60.61 a share.
Intuitive’s long-term outlook is positive. However, the stock has moved up 68% since August 2011. It now trades at 38.4 times the $14 a share that the company will likely earn in 2012.
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Revenue from replenishable supplies rose 32.0%. Intuitive gets almost 40% of its revenue from steady sales of replacement parts, training and other services. That cuts its risk. The company is debt-free, and holds cash of $2.4 billion, or $60.61 a share.
Intuitive’s long-term outlook is positive. However, the stock has moved up 68% since August 2011. It now trades at 38.4 times the $14 a share that the company will likely earn in 2012.
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THE CHURCHILL CORP. $12.40 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.3 million; Market cap: $301.3 million; Dividend yield: 3.9%) reports that its revenue rose 9.4% in the three months ended March 31, 2012, to $333.3 million from $304.7 million a year earlier. That’s because the industrial services company’s mining and oil sands clients increased their construction activity.
Even so, earnings fell 46.6%, to $3.1 million, or $0.13 a share, from $5.8 million, or $0.24 a share. That was mostly due to lowprofit- margin contracts that the company took on as part of its recent acquisitions, or when its markets were more competitive in late 2008, 2009 and early 2010. Most of these unfavourable deals should be completed by the end of this year.
Churchill is still a buy.
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Even so, earnings fell 46.6%, to $3.1 million, or $0.13 a share, from $5.8 million, or $0.24 a share. That was mostly due to lowprofit- margin contracts that the company took on as part of its recent acquisitions, or when its markets were more competitive in late 2008, 2009 and early 2010. Most of these unfavourable deals should be completed by the end of this year.
Churchill is still a buy.
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DELPHI ENERGY $1.26 (Toronto symbol DEE; TSINetwork Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 131.0 million; Market cap: $165.1 million; No dividends paid) explores for oil and natural gas in Alberta and B.C. Gas makes up 73% of Delphi’s daily output; the remaining 27% is oil.
In the three months ended March 31, 2012, Delphi’s average daily output rose 8.8%, to 8,993 barrels of oil equivalent (including natural gas) from 8,259 barrels a year earlier.
The higher production couldn’t offset lower natural gas prices. As a result, the company’s cash flow per share fell 38.5%, to $0.08 from $0.13.
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In the three months ended March 31, 2012, Delphi’s average daily output rose 8.8%, to 8,993 barrels of oil equivalent (including natural gas) from 8,259 barrels a year earlier.
The higher production couldn’t offset lower natural gas prices. As a result, the company’s cash flow per share fell 38.5%, to $0.08 from $0.13.
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BELLATRIX EXPLORATION $3.49 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266- 8670; www.bellatrixexploration.com; Shares outstanding: 107.5 million; Market cap: $375.2 million; No dividends paid) produces oil and natural gas in Alberta, B.C. and Saskatchewan. Gas makes up about 61% of its output; the remaining 39% is oil.
In the three months ended March 31, 2012, Bellatrix’s production rose 57.7%, to 15,900 barrels of oil equivalent per day (including natural gas) from 10,084 barrels. The company’s drilling success continues to add to its production: in the latest quarter, it drilled 13 wells with a 100% success rate.
Cash flow per share rose 58.8%, to $0.27 from $0.17. The big production increase offset a 41.1% drop in Bellatrix’s average selling price for gas, to $2.32 U.S. per thousand cubic feet from $3.94 U.S. a year ago. The company’s long-term debt is $146.2 million, or a manageable 39.0% of its market cap.
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In the three months ended March 31, 2012, Bellatrix’s production rose 57.7%, to 15,900 barrels of oil equivalent per day (including natural gas) from 10,084 barrels. The company’s drilling success continues to add to its production: in the latest quarter, it drilled 13 wells with a 100% success rate.
Cash flow per share rose 58.8%, to $0.27 from $0.17. The big production increase offset a 41.1% drop in Bellatrix’s average selling price for gas, to $2.32 U.S. per thousand cubic feet from $3.94 U.S. a year ago. The company’s long-term debt is $146.2 million, or a manageable 39.0% of its market cap.
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IAMGOLD $9.38 (Toronto symbol IMG; TSINetwork Rating: Speculative) (1-888-464-9999; www.iamgold.com; Shares outstanding: 376.1 million; Market cap: $3.5 billion; Dividend yield: 2.7%) is buying Trelawney Mining and Exploration (symbol TRR on Toronto).
Prices of junior mining stocks are depressed, so IAMGold is getting a bargain at $608 million, or $3.30 for each Trelawney share. That’s a premium on the $2.30 it was trading at before IAMGold’s offer, but it’s well below the high of $5.91 that Trelawney shares hit in July 2011.
Trelawney’s Cote Lake gold project, located between Timmins and Sudbury, could hold as much as 6.9 million ounces of gold. The deal also lets IAMGold expand its operations in politically safe countries; its biggest mines are in Suriname and Burkina Faso in West Africa.
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Prices of junior mining stocks are depressed, so IAMGold is getting a bargain at $608 million, or $3.30 for each Trelawney share. That’s a premium on the $2.30 it was trading at before IAMGold’s offer, but it’s well below the high of $5.91 that Trelawney shares hit in July 2011.
Trelawney’s Cote Lake gold project, located between Timmins and Sudbury, could hold as much as 6.9 million ounces of gold. The deal also lets IAMGold expand its operations in politically safe countries; its biggest mines are in Suriname and Burkina Faso in West Africa.
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RUSSEL METALS $25.90 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 60.1 million; Market cap: $1.6 billion; Dividend yield: 5.4%) 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 March 31, 2012, Russel’s revenue rose 22.1%, to $802.9 million from $657.7 million a year earlier. Revenue rose at all three of Russel’s divisions: The steel distribution division’s revenue rose 42% on higher sales volumes. Metal services revenue rose 18%, also on higher sales volumes. The energy tubular products division, which supplies pipes for oil and gas firms, saw its revenue rise 23%, because of increased drilling activity. Earnings per share were flat at $0.55 on steady steel prices.
Russel raised its quarterly dividend by 16.7% with the June 2012 payment, to $0.35 from $0.30. The stock now yields 5.4%. The company holds cash of $160.3 million, or $2.67 share. Its $294.6 million of long-term debt is a reasonable 18.9% of its market cap.
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In the three months ended March 31, 2012, Russel’s revenue rose 22.1%, to $802.9 million from $657.7 million a year earlier. Revenue rose at all three of Russel’s divisions: The steel distribution division’s revenue rose 42% on higher sales volumes. Metal services revenue rose 18%, also on higher sales volumes. The energy tubular products division, which supplies pipes for oil and gas firms, saw its revenue rise 23%, because of increased drilling activity. Earnings per share were flat at $0.55 on steady steel prices.
Russel raised its quarterly dividend by 16.7% with the June 2012 payment, to $0.35 from $0.30. The stock now yields 5.4%. The company holds cash of $160.3 million, or $2.67 share. Its $294.6 million of long-term debt is a reasonable 18.9% of its market cap.
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WESTJET AIRLINES $15.48 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 130.8 million; Market cap: $2.0 billion; Dividend yield: 1.6%) serves 76 destinations in North America and the Caribbean. Its fleet of 98 modern Boeing Next-Generation 737s are 30% more fuel efficient than older aircraft. WestJet is scheduled to receive 37 more 737s through 2018.
In the three months ended March 31, 2012, West- Jet’s revenue rose 15.3%, to $781.5 million from $692.2 million a year earlier.
Earnings jumped 41.6%, to $68.3 million from $48.2 million. That’s a new record for the first quarter. It also marks the company’s 28th consecutive quarter of profitability. The higher revenue was the main reasons for the gain. Earnings per share rose 47.1%, to $0.50 from $0.34, on fewer shares outstanding.
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In the three months ended March 31, 2012, West- Jet’s revenue rose 15.3%, to $781.5 million from $692.2 million a year earlier.
Earnings jumped 41.6%, to $68.3 million from $48.2 million. That’s a new record for the first quarter. It also marks the company’s 28th consecutive quarter of profitability. The higher revenue was the main reasons for the gain. Earnings per share rose 47.1%, to $0.50 from $0.34, on fewer shares outstanding.
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