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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PASON SYSTEMS $14.24 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403- 301-3400; www.pason.com; Shares outstanding: 81.9 million; Market cap: $1.1 billion; Dividend yield: 3.1%) reported 31.8% higher revenue in the three months ended March 31, 2012, to $111.7 million from $84.7 million a year earlier. Many of the company’s clients increased their drilling, especially for shale gas and oil.
Earnings jumped 66.0%, to $29.5 million, or $0.36 a share, from $17.8 million, or $0.22 a share. Pason has raised its semi-annual dividend by 10%, to $0.22 from $0.20. The shares now yield 3.1%.
The company is heavily reliant on the resource sector. However, Pason’s revenue and earnings should keep rising as oil and gas drilling continues to increase.
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Earnings jumped 66.0%, to $29.5 million, or $0.36 a share, from $17.8 million, or $0.22 a share. Pason has raised its semi-annual dividend by 10%, to $0.22 from $0.20. The shares now yield 3.1%.
The company is heavily reliant on the resource sector. However, Pason’s revenue and earnings should keep rising as oil and gas drilling continues to increase.
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AMERIGO RESOURCES $0.61 (Toronto symbol ARG; TSINetwork Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 172.3 million; Market cap: $105.1 million; Dividend yield: 6.6%) processes copper and molybdenum from the waste rock from Chile’s El Teniente, the world’s largest copper mine. The contract runs at least through 2021. Amerigo has a further agreement to process a supplementary source of material from the nearby Colihues tailings pond.
The company gets 94% of revenue by processing copper. The remaining 6% comes from molybdenum.
Amerigo is now in discussions with El Teniente to process more waste rock at the site. Amerigo has started work on the design, engineering and permitting for a three-stage expansion that should double its production capacity. If the two companies can’t reach an agreement, El Teniente has agreed to reimburse Amerigo for any costs it incurs.
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The company gets 94% of revenue by processing copper. The remaining 6% comes from molybdenum.
Amerigo is now in discussions with El Teniente to process more waste rock at the site. Amerigo has started work on the design, engineering and permitting for a three-stage expansion that should double its production capacity. If the two companies can’t reach an agreement, El Teniente has agreed to reimburse Amerigo for any costs it incurs.
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SHERRITT INTERNATIONAL $5.26 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 296.7 million; Market cap: $1.6 billion; Dividend yield: 2.9%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 376 megawatts of power generation capacity in Cuba.
Sherritt is a major nickel producer, with operations in Cuba and Canada. It is also close to finishing a mine at its 40%-owned Ambatovy project on the island nation of Madagascar, off Africa’s east coast. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. It is also Canada’s largest thermal coal producer.
In the three months ended March 31, 2012, Sherritt’s revenue fell 2.6%, to $462.2 million from $474.5 million a year earlier. Lower nickel prices were the main reason for the decline. Cash flow fell 17.0%, to $117 million, or $0.40 a share, from $141 million, or $0.48 a share. That was due to the lower revenue and higher production costs.
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Sherritt is a major nickel producer, with operations in Cuba and Canada. It is also close to finishing a mine at its 40%-owned Ambatovy project on the island nation of Madagascar, off Africa’s east coast. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. It is also Canada’s largest thermal coal producer.
In the three months ended March 31, 2012, Sherritt’s revenue fell 2.6%, to $462.2 million from $474.5 million a year earlier. Lower nickel prices were the main reason for the decline. Cash flow fell 17.0%, to $117 million, or $0.40 a share, from $141 million, or $0.48 a share. That was due to the lower revenue and higher production costs.
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TEMPUR-PEDIC $49.38 (New York symbol TPX; TSINetwork Rating: Speculative) (800- 878-8889; www.tempurpedic.com; Shares outstanding: 63.8 million; Market cap: $3.2 billion; No dividends paid) reported higher sales and earnings in the latest quarter. However, the company’s earnings estimate for 2012 was below expectations. The stock has since dropped 41%.
In the three months ended March 31, 2012, Tempur-Pedic’s earnings per share rose 26.5%, to $0.86 from $0.68. Sales rose 18.0%, to $384.4 million from $325.8 million.
Tempur-Pedic expects to earn $3.80 to $3.95 a share in 2012 on revenue of $1.6 billion to $1.65 billion. That’s below the consensus estimate of $3.97 a share on revenue of $1.66 billion.
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In the three months ended March 31, 2012, Tempur-Pedic’s earnings per share rose 26.5%, to $0.86 from $0.68. Sales rose 18.0%, to $384.4 million from $325.8 million.
Tempur-Pedic expects to earn $3.80 to $3.95 a share in 2012 on revenue of $1.6 billion to $1.65 billion. That’s below the consensus estimate of $3.97 a share on revenue of $1.66 billion.
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SYMANTEC CORP. $15.03 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 729.4 million; Market cap: $11.0 billion; No dividends paid) makes computersecurity software, including the popular Norton antivirus program. It also sells products and services for email filtering, data backup and other business-related uses. In addition, Symantec offers data-archiving software that helps its clients meet increasingly strict regulatory and compliance standards.
In the three months ended March 31, 2012, Symantec’s earnings per share excluding one-time items were unchanged at $0.38. That matched the consensus estimate. Sales rose slightly, to $1.68 billion from $1.67 billion. The company gets 52% of its sales from outside North America.
The main reason for the flat results was that the company is selling more of its products as ongoing subscriptions instead of one-time purchases. That gives Symantec steadier revenue streams but lower upfront sales. Sales of data-storage products are also down, mainly because the company completed several big contracts in the year-earlier quarter.
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In the three months ended March 31, 2012, Symantec’s earnings per share excluding one-time items were unchanged at $0.38. That matched the consensus estimate. Sales rose slightly, to $1.68 billion from $1.67 billion. The company gets 52% of its sales from outside North America.
The main reason for the flat results was that the company is selling more of its products as ongoing subscriptions instead of one-time purchases. That gives Symantec steadier revenue streams but lower upfront sales. Sales of data-storage products are also down, mainly because the company completed several big contracts in the year-earlier quarter.
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ACI WORLDWIDE $40.01 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 39.8 million; Market cap: $1.6 billion; No dividends paid) makes software that is used to process transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments.
In mid-February 2012, ACI completed its purchase of S1 Corp. for $540 million in cash and stock. This acquisition is a good fit: S1 sells transaction software for banks, credit unions, retailers and other payment processors. It has over 3,000 clients worldwide.
In the first quarter of 2012, ACI’s revenue rose 31.6%, to $137.6 million from $104.5 million a year earlier. The gain was largely due to S1’s $22.5-million contribution. Without acquisition-related costs, earnings per share rose sharply, to $0.28 from $0.05.
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In mid-February 2012, ACI completed its purchase of S1 Corp. for $540 million in cash and stock. This acquisition is a good fit: S1 sells transaction software for banks, credit unions, retailers and other payment processors. It has over 3,000 clients worldwide.
In the first quarter of 2012, ACI’s revenue rose 31.6%, to $137.6 million from $104.5 million a year earlier. The gain was largely due to S1’s $22.5-million contribution. Without acquisition-related costs, earnings per share rose sharply, to $0.28 from $0.05.
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INTACT FINANCIAL CORP. $63.96 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341-1464; www.intactfc.com; Shares outstanding: 129.6 million; Market cap: $8.3 billion; Dividend yield: 2.5%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.
In the three months ended March 31, 2012, Intact’s revenue rose 47.9%, to $1.58 billion from $1.07 billion. That was mainly due to the contribution from AXA Canada, which Intact bought from Paris-based ASX Group for $2.6 billion last year.
AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.
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In the three months ended March 31, 2012, Intact’s revenue rose 47.9%, to $1.58 billion from $1.07 billion. That was mainly due to the contribution from AXA Canada, which Intact bought from Paris-based ASX Group for $2.6 billion last year.
AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.
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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. This past week, an Inner Circle member who is also a client of our portfolio management services had a question about one of Canada’s rising tech stocks. This broadcast equipment specialist, whose prominence has increased due to the upcoming Summer Olympics, is grooming itself as a takeover candidate....
A positive outlook for the Canadian economy will continue to boost stocks across many industries. Some stocks benefit by supplying different industries, like this heavy equipment supplier we have just added it to the list of growth stocks we cover in our newsletter for aggressive investing, Stock Pickers Digest. WAJAX CORP. (Toronto symbol WJX; www.wajax.ca) sells and services heavy equipment, including cranes and forklifts. It also sells related parts (such as bearings, motors, hoses and fittings) and power systems (including diesel engines and transmissions)....
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. Last week, an Inner Circle member, pleased with his investment in one U.S. stock, wanted to know if it would continue to pay off. This company uses personal sales representatives to sell its skin care and nutritional products and gets most of its sales in foreign markets like China....
