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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NORDSTROM INC. $50 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 208.6 million; Market cap: $10.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.0%; TSINetwork Rating: Average; www.nordstrom.com) continues to add new Nordstrom Rack stores, which sell clearance merchandise from the company’s regular stores. That helps it attract cost-conscious shoppers.
The new stores increased sales by 13.2% in the quarter ended April 28, 2012, to $2.6 billion from $2.3 billion a year earlier. Same-store sales rose 8.5%.
Earnings rose at a slower pace of 2.8%, to $149 million from $145 million. Per-share earnings rose 7.7%, to $0.70 from $0.65, on fewer shares outstanding. Nordstrom’s profit margins fell because it introduced new loyalty programs and free shipping to compete with other retailers.
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The new stores increased sales by 13.2% in the quarter ended April 28, 2012, to $2.6 billion from $2.3 billion a year earlier. Same-store sales rose 8.5%.
Earnings rose at a slower pace of 2.8%, to $149 million from $145 million. Per-share earnings rose 7.7%, to $0.70 from $0.65, on fewer shares outstanding. Nordstrom’s profit margins fell because it introduced new loyalty programs and free shipping to compete with other retailers.
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J.P. MORGAN CHASE & CO. $34 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.8 billion; Market cap: $129.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.5%; TSINetwork Rating: Average; www.jpmorganchase.com) recently announced a $2-billion loss on complex hedging contracts that it uses to cut the risk on corporate bonds it holds.
This unexpected trading loss has prompted the bank to suspend its plan to repurchase $15 billion of its shares by March 31, 2013. However, it will continue to pay a quarterly dividend of $0.30 a share, for an annualized yield of 3.5%.
J.P. Morgan Chase is still a hold.
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This unexpected trading loss has prompted the bank to suspend its plan to repurchase $15 billion of its shares by March 31, 2013. However, it will continue to pay a quarterly dividend of $0.30 a share, for an annualized yield of 3.5%.
J.P. Morgan Chase is still a hold.
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CEDAR FAIR L.P. $26 (New York symbol FUN; Income Portfolio, Consumer sector; Units outstanding: 55.5 million; Market cap: $1.4 billion; Priceto- sales ratio: 1.4; Dividend yield: 6.2%; TSINetwork Rating: Average; www.cedarfair.com) owns 11 amusement parks, seven water parks and one hotel.
The partnership typically earns most of its money in the summer, as only one of its parks (Knott’s Berry Farm in Southern California) stays open year round. Still, Cedar Fair’s revenue rose 4.9% in the first quarter of 2012, to $28.2 million from $26.7 million a year earlier. Its loss narrowed to $65.2 million, or $1.18 a unit, from $84.7 million, or $1.53 a unit.
Cedar Fair keeps upgrading its parks: it will spend $90 million on new roller coasters and other attractions in 2012. That’s similar to what it spent in 2011.
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The partnership typically earns most of its money in the summer, as only one of its parks (Knott’s Berry Farm in Southern California) stays open year round. Still, Cedar Fair’s revenue rose 4.9% in the first quarter of 2012, to $28.2 million from $26.7 million a year earlier. Its loss narrowed to $65.2 million, or $1.18 a unit, from $84.7 million, or $1.53 a unit.
Cedar Fair keeps upgrading its parks: it will spend $90 million on new roller coasters and other attractions in 2012. That’s similar to what it spent in 2011.
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BUCKEYE PARTNERS L.P. $48 (New York symbol BPL; Income Portfolio, Utilities sector; Units outstanding: 97.8 million; Market cap: $4.7 billion; Price-to-sales ratio: 1.0; Dividend yield: 8.6%; TSINetwork Rating: Average; www.buckeye.com) operates over 9,600 kilometres of pipelines in the northeastern and midwestern U.S. Its network pumps gasoline, jet fuel and other petroleum products. Buckeye also owns oil and natural gas storage terminals and other related businesses.
The partnership continues to expand by acquisition. In February 2012, it agreed to buy a terminal in New York Harbour. That gives it access to the Atlantic Ocean, which makes it easier for Buckeye to import oil from foreign producers. From there, it can pump the oil through its pipelines to its customers.
Buckeye will pay $260 million for this terminal when the purchase closes later this year. It recently sold $250 million of new units to cover most of this cost.
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The partnership continues to expand by acquisition. In February 2012, it agreed to buy a terminal in New York Harbour. That gives it access to the Atlantic Ocean, which makes it easier for Buckeye to import oil from foreign producers. From there, it can pump the oil through its pipelines to its customers.
Buckeye will pay $260 million for this terminal when the purchase closes later this year. It recently sold $250 million of new units to cover most of this cost.
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WEYERHAEUSER CO. $20 (New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 537.5 million; Market cap: $10.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.0%; TSINetwork Rating: Extra Risk; www.weyerhaeuser.com) is a leading maker of forest products, including paper and packaging. The company owns or leases over 20.3 million acres of timberland in the U.S. and Canada.
In 2010, Weyerhaeuser converted to a real estate investment trust (REIT). REITs pay little or no income tax, and must pay 90% of their earnings to their shareholders as dividends. Right now, Weyerhaeuser pays a regular quarterly dividend of $0.15 a share, for a 3.0% annualized yield.
The company continues to sell less profitable assets: in 2011, it sold $838 million of real estate.
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In 2010, Weyerhaeuser converted to a real estate investment trust (REIT). REITs pay little or no income tax, and must pay 90% of their earnings to their shareholders as dividends. Right now, Weyerhaeuser pays a regular quarterly dividend of $0.15 a share, for a 3.0% annualized yield.
The company continues to sell less profitable assets: in 2011, it sold $838 million of real estate.
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GOOGLE INC. $609 (Nasdaq symbol GOOG; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 326.0 million; Market cap: $198.5 billion; Price-to-sales ratio: 4.9; No dividends paid; TSINetwork Rating: Above Average; www.google.com) has completed its $12.5-billion purchase of cellphone maker Motorola Mobility Holdings Inc. (New York symbol MMI).
Owning Motorola gives Google access to patents that it can use to defend itself against lawsuits from other mobile phone makers. It will also make it easier for Google to integrate its popular Android operating system with new smartphones and tablet computers.
Google is a buy.
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Owning Motorola gives Google access to patents that it can use to defend itself against lawsuits from other mobile phone makers. It will also make it easier for Google to integrate its popular Android operating system with new smartphones and tablet computers.
Google is a buy.
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XEROX CORP. $7.19 (New York symbol XRX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.4 billion; Market cap: $10.1 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.4%; TSINetwork Rating: Average; www.xerox.com) recently started providing services to businesses, such as processing credit card applications and insurance claims. That’s helping the company lower its reliance on more cyclical sales of office equipment, like copiers and printers.
In the three months ended March 31, 2012, Xerox’s revenue rose 0.7%, to $5.50 billion from $5.47 billion a year earlier. However, ongoing investments to expand its services operations cut its earnings by 4.5%, to $319 million from $334 million a year earlier. Earnings per share were unchanged at $0.23.
Xerox is a hold.
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In the three months ended March 31, 2012, Xerox’s revenue rose 0.7%, to $5.50 billion from $5.47 billion a year earlier. However, ongoing investments to expand its services operations cut its earnings by 4.5%, to $319 million from $334 million a year earlier. Earnings per share were unchanged at $0.23.
Xerox is a hold.
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ABB LTD. ADRs $16 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $36.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 4.5%; TSINetwork Rating: Above Average; www.abb.com) is a leading maker of power technologies for utilities. The Switzerland-based company’s products include transformers, transmission systems and circuit breakers. It also makes automation systems and robotics. Clients in a range of industries use ABB’s systems to make their facilities more productive.
The company is taking advantage of the slow economy to expand its U.S. operations. In January 2011, it paid $4.2 billion for Arkansas-based Baldor Electric Co., which makes electric motors and related products, such as conveyor belts, fans and pumps.
Baldor’s contribution increased ABB’s revenue by 6.0% in the first quarter of 2012, to $8.9 billion from $8.4 billion a year earlier. Strong gains in the Americas helped offset weaker demand in Europe and Asia.
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The company is taking advantage of the slow economy to expand its U.S. operations. In January 2011, it paid $4.2 billion for Arkansas-based Baldor Electric Co., which makes electric motors and related products, such as conveyor belts, fans and pumps.
Baldor’s contribution increased ABB’s revenue by 6.0% in the first quarter of 2012, to $8.9 billion from $8.4 billion a year earlier. Strong gains in the Americas helped offset weaker demand in Europe and Asia.
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CANON INC. ADRs $41 (New York symbol CAJ; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.2 billion; Market cap: $49.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.canon.com) gets 49% of its revenue by making printers; consumer products, such as cameras and inkjet printers (40% of revenue); and industrial products, such as chips and other components for TV sets, medical equipment and mobile devices (11%).
In the three months ended March 31, 2012, Canon’s earnings rose 12.3%, to $750.5 million from $668.2 million a year earlier. Earnings per ADR rose 16.7%, to $0.63 from $0.54, on fewer ADRs outstanding (each ADR represents one common share).
The gains were largely due to lower costs. For example, Canon is using more robots to assemble its products.
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In the three months ended March 31, 2012, Canon’s earnings rose 12.3%, to $750.5 million from $668.2 million a year earlier. Earnings per ADR rose 16.7%, to $0.63 from $0.54, on fewer ADRs outstanding (each ADR represents one common share).
The gains were largely due to lower costs. For example, Canon is using more robots to assemble its products.
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BHP BILLITON LTD. ADRs $63 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.7 billion; Market cap: $170.1 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.5%; TSINetwork Rating: Average; www.bhpbilliton.com) is the world’s largest mining company, with operations in Australia, South Africa, Chile and the U.K. It produces iron ore, coal, oil, natural gas, aluminum, manganese, diamonds and titanium.
In 2011, BHP expanded its oil and gas business with two major purchases: it paid $12.0 billion for Petrohawk Energy Corp., which produces oil and natural gas in Texas and Louisiana; and $4.75 billion for shale gas properties in Arkansas.
These acquisitions increased BHP’s oil and gas production by 58% in three months ended March 31, 2012, to 56.5 million barrels of oil equivalent (including gas) from a year earlier.
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In 2011, BHP expanded its oil and gas business with two major purchases: it paid $12.0 billion for Petrohawk Energy Corp., which produces oil and natural gas in Texas and Louisiana; and $4.75 billion for shale gas properties in Arkansas.
These acquisitions increased BHP’s oil and gas production by 58% in three months ended March 31, 2012, to 56.5 million barrels of oil equivalent (including gas) from a year earlier.
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