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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GENERAL ELECTRIC CO. $19 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.6 billion; Market cap: $201.4 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.ge.com) is one of the world’s largest manufacturers. It makes equipment for generating and distributing electricity, such as turbines (31% of revenue, 32% of earnings); aircraft engines (13%, 17%); health care equipment, such as medical scanners (13%, 14%); home appliances and lighting (6%, 1%); and locomotives (3%, 4%).
Following the 2008/2009 financial crisis, the company scaled back the activities of its GE Capital subsidiary, which provides loans and other financial services to GE’s customers. This business now accounts for 34% of GE’s revenue and 32% of its earnings.
Following the 2008/2009 financial crisis, the company scaled back the activities of its GE Capital subsidiary, which provides loans and other financial services to GE’s customers. This business now accounts for 34% of GE’s revenue and 32% of its earnings.
Recession took a toll …
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MOLSON COORS BREWING CO. $41 (New York symbol TAP;
Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 180.7 million; Market cap: $7.4 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.1%; TSINetwork Rating: Average; www.molsoncoors.com) has agreed buy StarBev L.P., which owns nine breweries in central and eastern Europe. The deal will close by June 30, 2012.
Molson Coors will pay $3.5 billion for StarBev. The company held cash of $1.1 billion at the end of 2011, so it will have to borrow most of the funds it will need to complete this purchase. Molson Coors’long-term debt of $1.9 billion is a moderate 26% of its market cap, so it can comfortably afford to borrow more money.
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Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 180.7 million; Market cap: $7.4 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.1%; TSINetwork Rating: Average; www.molsoncoors.com) has agreed buy StarBev L.P., which owns nine breweries in central and eastern Europe. The deal will close by June 30, 2012.
Molson Coors will pay $3.5 billion for StarBev. The company held cash of $1.1 billion at the end of 2011, so it will have to borrow most of the funds it will need to complete this purchase. Molson Coors’long-term debt of $1.9 billion is a moderate 26% of its market cap, so it can comfortably afford to borrow more money.
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PROCTER & GAMBLE CO. $67 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.8 billion; Market cap: $187.6 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.pg.com) has raised its quarterly dividend by 7.0%, to $0.562 a share from $0.525. The new annual rate of $2.25 yields 3.4%. Procter has paid dividends for 122 straight years, and has raised the payout each year for past 56 years.
Rising fuel and raw material costs continue to squeeze the company’s profit margins. In response, Procter has announced that it will cut jobs and spend less on advertising its household and personal-care products.
These moves should save it $10 billion over the next four years. To put this figure in context, Procter earned $4.7 billion, or $1.60 a share, in the six months ended December 31, 2011.
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Rising fuel and raw material costs continue to squeeze the company’s profit margins. In response, Procter has announced that it will cut jobs and spend less on advertising its household and personal-care products.
These moves should save it $10 billion over the next four years. To put this figure in context, Procter earned $4.7 billion, or $1.60 a share, in the six months ended December 31, 2011.
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ALLIANT ENERGY CORP. $45 (New York symbol LNT; Income Portfolio, Utilities sector; Shares outstanding: 111.0 million; Market cap: $5.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 4.0%; TSINetwork Rating: Average; www.alliantenergy.com) has won regulatory approval to buy the Riverside gas-fired power plant in Beloit, Wisconsin. Right now, the company purchases power from this plant under a long-term contract. This deal also gives Alliant an option to buy the plant by May 31, 2012. The company is still deciding whether to do so.
If Alliant exercise its option, it would have to pay $392 million for the plant. That’s equal to 1.3 times the $305.3 million, or $2.76 a share, that it earned in 2011. Still, a purchase would let Alliant cut the plant’s costs. It would also lower the company’s need to buy power at unpredictable market prices.
Alliant Energy is a buy.
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If Alliant exercise its option, it would have to pay $392 million for the plant. That’s equal to 1.3 times the $305.3 million, or $2.76 a share, that it earned in 2011. Still, a purchase would let Alliant cut the plant’s costs. It would also lower the company’s need to buy power at unpredictable market prices.
Alliant Energy is a buy.
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MACY’S INC. $40 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 418.5 million; Market cap: $16.7 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.0%; TSINetwork Rating: Average; www.macysinc.com) continues to benefit from its My Macy’s plan to tailor its merchandise to local tastes. This strategy has attracted new shoppers to its department stores and encouraged repeat visits.
As a result, its same-store sales were 7.3% higher in March 2012 than in March 2011. Macy’s is also seeing strong sales growth at its websites: online sales jumped 39.0% from March 2011.
Macy’s is a buy.
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As a result, its same-store sales were 7.3% higher in March 2012 than in March 2011. Macy’s is also seeing strong sales growth at its websites: online sales jumped 39.0% from March 2011.
Macy’s is a buy.
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JONES GROUP INC. $11 (New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 82.3 million; Market cap: $905.3 million; Price-to-sales ratio: 0.3; Dividend yield: 1.8%; TSINetwork Rating: Average; www.jonesgroupinc.com) designs clothing, accessories and footwear for men and women. Its major brands include Jones New York, Gloria Vanderbilt, Anne Klein and Nine West.
The company continues to invest in new, upscale brands. It feels these additions will supply about 18% of its sales in 2012, up from 14% in 2011. Jones is also expanding overseas. In June 2011, it paid $350 million for Kurt Geiger, Europe’s largest luxury shoe retailer.
Even with these new businesses, Jones’s sales fell 2.6% in the three months ended March 31, 2012, to $936.0 million from $961.3 million a year earlier. Higher operating and interest expenses caused earnings to fall 24.8%, to $23.6 million, or $0.31 a share, from $31.4 million, or $0.38 a share.
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The company continues to invest in new, upscale brands. It feels these additions will supply about 18% of its sales in 2012, up from 14% in 2011. Jones is also expanding overseas. In June 2011, it paid $350 million for Kurt Geiger, Europe’s largest luxury shoe retailer.
Even with these new businesses, Jones’s sales fell 2.6% in the three months ended March 31, 2012, to $936.0 million from $961.3 million a year earlier. Higher operating and interest expenses caused earnings to fall 24.8%, to $23.6 million, or $0.31 a share, from $31.4 million, or $0.38 a share.
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LIMITED BRANDS INC. $49 (New York symbol LTD; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 289.4 million; Market cap: $14.2 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.0%; TSINetwork Rating: Average; www.limitedbrands.com) owns the Victoria’s Secret lingerie chain and the Bath & Body Works personal-care products stores. It also owns the La Senza lingerie chain in Canada.
The company continues to expand its well-known brands into related niche markets. For example, in 2004, Limited launched the Victoria’s Secret Pink clothing line for younger women. This brand’s success has prompted the company to open two stand-alone Pink stores in the U.S. and eight in Canada.
Limited also plans to open more stores outside North America. This move gives the company lots of growth potential: right now, Limited gets just 9% of its sales from outside the continent.
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The company continues to expand its well-known brands into related niche markets. For example, in 2004, Limited launched the Victoria’s Secret Pink clothing line for younger women. This brand’s success has prompted the company to open two stand-alone Pink stores in the U.S. and eight in Canada.
Limited also plans to open more stores outside North America. This move gives the company lots of growth potential: right now, Limited gets just 9% of its sales from outside the continent.
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GANNETT CO. INC. $14 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 237.0 million; Market cap: $3.3 billion; Price-to-sales ratio: 0.6; Dividend yield: 5.7%; TSINetwork Rating: Average; www.gannett.com) earned $80.8 million, or $0.34 a share, in the first quarter of 2012. That’s down 18.3% from $98.9 million, or $0.41 a share, a year earlier. Revenue fell 2.6%, to $1.22 billion from $1.25 billion.
The company spent $20 million on new growth projects in the quarter, including new applications for mobile devices and an expansion of its sports-related news services. This was the main reason for the lower earnings. As well, advertising revenue at its newspapers and TV stations should rebound during the Summer Olympics and the run-up to the November presidential election.
Gannett is a buy.
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The company spent $20 million on new growth projects in the quarter, including new applications for mobile devices and an expansion of its sports-related news services. This was the main reason for the lower earnings. As well, advertising revenue at its newspapers and TV stations should rebound during the Summer Olympics and the run-up to the November presidential election.
Gannett is a buy.
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NVIDIA CORP. $13 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 616.0 million; Market cap: $8.0 billion; Price-to-sales ratio: 2.0; No dividends paid; TSINetwork Rating: Average; www.nvidia.com) designs chips that make computer games run more smoothly and appear more lifelike.
In its 2012 fiscal year, which ended January 29, 2012, the company’s earnings rose 54.2%, to $734.4 million from $476.4 million in fiscal 2011. Earnings per share rose 46.9%, to $1.19 from $0.81, on more shares outstanding. Nvidia spent 25.1% of its sales on research in fiscal 2012, so it’s more profitable than it appears.
Sales rose 12.8%, to $4.0 billion from $3.5 billion. Nvidia continues to see strong demand for its new Tegra chips from mobile device makers. That’s helping offset slowing sales to computer makers.
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In its 2012 fiscal year, which ended January 29, 2012, the company’s earnings rose 54.2%, to $734.4 million from $476.4 million in fiscal 2011. Earnings per share rose 46.9%, to $1.19 from $0.81, on more shares outstanding. Nvidia spent 25.1% of its sales on research in fiscal 2012, so it’s more profitable than it appears.
Sales rose 12.8%, to $4.0 billion from $3.5 billion. Nvidia continues to see strong demand for its new Tegra chips from mobile device makers. That’s helping offset slowing sales to computer makers.
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INTEL CORP. $28 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.0 billion; Market cap: $140.0 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.intel.com) is the world’s largest computer chip maker. About 80% of all computers use the company’s chips.
In the first quarter of 2012, Intel’s revenue rose 0.5%, to $12.9 billion from $12.8 billion a year earlier. Recent flooding in Thailand caused a hard drive shortage that hurt computer sales. That cut demand for Intel’s chips and caused a 2.0% sales decline at the company’s PC Client Group (which supplies two-thirds of its total revenue). However, software sales jumped 137.9% following last year’s purchase of antivirus software specialist McAfee.
Without unusual items, such as costs to integrate McAfee, Intel would have earned $2.9 billion in the latest quarter. That’s down 11.0% from $3.2 billion. Earnings per share fell just 3.4%, to $0.56 from $0.58, on fewer shares outstanding.
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In the first quarter of 2012, Intel’s revenue rose 0.5%, to $12.9 billion from $12.8 billion a year earlier. Recent flooding in Thailand caused a hard drive shortage that hurt computer sales. That cut demand for Intel’s chips and caused a 2.0% sales decline at the company’s PC Client Group (which supplies two-thirds of its total revenue). However, software sales jumped 137.9% following last year’s purchase of antivirus software specialist McAfee.
Without unusual items, such as costs to integrate McAfee, Intel would have earned $2.9 billion in the latest quarter. That’s down 11.0% from $3.2 billion. Earnings per share fell just 3.4%, to $0.56 from $0.58, on fewer shares outstanding.
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