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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VITERRA $15.95 (Toronto symbol VT; TSINetwork Rating: Average) (1-866-569-4411; www.viterra.ca; Shares outstanding: 371.7 million; Market cap: $5.9 billion; Dividend yield: 1.0%) has agreed to a friendly takeover offer from Glencore International plc, a Switzerland-based commodity trader. The purchase price is $6.1 billion, or $16.25 per Viterra share.
Viterra was our Pick of the Month in the March 2012 issue of Stock Pickers Digest. At the time, it was trading at $10.09. That’s a 58.1% gain since that recommendation. Our view was that the company is well positioned to benefit from an expected rise in Canadian and Australian crop yields in 2012, as well as the end of the Canadian Wheat Board’s monopoly on western Canadian wheat and barley sales. In addition, its Australian operations’ sales to Asia continue to rise.
We also said that Viterra might be an attractive takeover target.
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Viterra was our Pick of the Month in the March 2012 issue of Stock Pickers Digest. At the time, it was trading at $10.09. That’s a 58.1% gain since that recommendation. Our view was that the company is well positioned to benefit from an expected rise in Canadian and Australian crop yields in 2012, as well as the end of the Canadian Wheat Board’s monopoly on western Canadian wheat and barley sales. In addition, its Australian operations’ sales to Asia continue to rise.
We also said that Viterra might be an attractive takeover target.
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AASTRA TECHNOLOGIES $21.70 (Toronto symbol AAH; TSINetwork Rating: Speculative) (905- 760-4200; www.aastra.com; Shares outstanding: 14.0 million; Market cap: $303.8 million; Dividend yield: 3.7%) has completed its Dutch auction process, and has repurchased 2.17 million of its common shares at a cost of $23 each, for a total of $49.9 million.
In all, the company bought back roughly 15.5% its shares outstanding. Share buybacks raise earnings per share and other per-share calculations, and give the remaining shareholders a larger stake in the company.
Aastra is still a buy for aggressive investors.
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In all, the company bought back roughly 15.5% its shares outstanding. Share buybacks raise earnings per share and other per-share calculations, and give the remaining shareholders a larger stake in the company.
Aastra is still a buy for aggressive investors.
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GABRIEL RESOURCES $2.94 (Toronto symbol GBU; TSINetwork Rating: Speculative) (416-955-9200; www.gabrielresources.com; Shares outstanding: 379.6 million; Market cap: $1.1 billion; No dividends paid) is down almost 35% since the company suffered setbacks in early April in its bid to build a mine at its 80.46%-owned Rosia Montana gold and silver project in Romania.
The court of appeals in Alba County, Romania, has now annulled a zoning permit relating to an area that Gabriel plans to incorporate into its mine. The lawsuit was started by two groups that oppose the project.
Gabriel sees the ruling as just another setback to be overcome, and feels that it shouldn’t affect the ongoing permitting process for the project. As well, most of Rosia Montana’s 2,800 residents believe that the project will bring back the much-needed jobs the area lost when a state-owned gold mine closed in 2006.
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The court of appeals in Alba County, Romania, has now annulled a zoning permit relating to an area that Gabriel plans to incorporate into its mine. The lawsuit was started by two groups that oppose the project.
Gabriel sees the ruling as just another setback to be overcome, and feels that it shouldn’t affect the ongoing permitting process for the project. As well, most of Rosia Montana’s 2,800 residents believe that the project will bring back the much-needed jobs the area lost when a state-owned gold mine closed in 2006.
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SASOL LTD. (ADR) $46.49 (New York symbol SSL; TSINetwork Rating: Extra Risk) (082-883-9697; www.sasol.com; ADRs outstanding: 641.4 million; Market cap: $29.9 billion; Dividend yield: 5.3%) is a South Africa-based company that has developed a technology to convert coal and natural gas into motor fuels.
In the six months ended December 31, 2011, Sasol’s revenue rose 23.9%, to $11.0 billion from $8.9 billion a year earlier (all figures in U.S. dollars). Earnings per ADR rose 81.8%, to $3.04 from $1.67. Higher oil prices were the main reason for the gains. A stronger U.S. dollar against the South African rand also pushed up the value of sales outside South Africa.
Last year, Sasol paid $2.2 billion for a 50% interest in two major shale gas properties held by Talisman Energy (symbol TLM on Toronto) in the Montney Basin region of western Alberta and northeastern B.C.
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In the six months ended December 31, 2011, Sasol’s revenue rose 23.9%, to $11.0 billion from $8.9 billion a year earlier (all figures in U.S. dollars). Earnings per ADR rose 81.8%, to $3.04 from $1.67. Higher oil prices were the main reason for the gains. A stronger U.S. dollar against the South African rand also pushed up the value of sales outside South Africa.
Last year, Sasol paid $2.2 billion for a 50% interest in two major shale gas properties held by Talisman Energy (symbol TLM on Toronto) in the Montney Basin region of western Alberta and northeastern B.C.
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ADOBE SYSTEMS $33.39 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536 -6000; www.adobe.com; Shares outstanding: 496.1 million; Market cap: $16.6 billion; No dividends paid) reports that in its fiscal 2012 first quarter, which ended March 2, 2012, its earnings fell 21.1%, to $185.2 million, or $0.37 a share. A year earlier, it earned $234.6 million, or $0.46 a share. Without unusual items, earnings per share fell 1.7%, to $0.57 from $0.58. Sales rose 1.7%, to $1.05 billion from $1.03 billion.
Customers are waiting for the new version of Adobe’s Creative Suite of publishing programs, which it will release later this year. That was the main reason for the lower earnings and weak sales growth.
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Customers are waiting for the new version of Adobe’s Creative Suite of publishing programs, which it will release later this year. That was the main reason for the lower earnings and weak sales growth.
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INTERNATIONAL ROAD DYNAMICS $0.28 (Toronto symbol IRD; TSINetwork Rating: Speculative) (306-653-6600; www.ird.ca; Shares outstanding: 14.0 million; Market cap: $3.9 million; No dividends paid) makes products and systems that manage highway traffic, including automated toll-road and weigh-station systems for trucks. The company’s weigh-in-motion system weighs trucks while they’re moving, rather than at less -efficient roadside weigh stations.
International Road continues to report rising losses and declining sales. That’s because governments are spending less on highway infrastructure as they struggle with ballooning budget deficits.
The company’s total debt of $6.7 million is a high 171.8% of its market cap. Its cash flow is negative, so it may need to borrow more money to sustain its operations. The cash shortfall could also make it hard for the company to maintain the marketing and research spending necessary to stay ahead of the competition.
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International Road continues to report rising losses and declining sales. That’s because governments are spending less on highway infrastructure as they struggle with ballooning budget deficits.
The company’s total debt of $6.7 million is a high 171.8% of its market cap. Its cash flow is negative, so it may need to borrow more money to sustain its operations. The cash shortfall could also make it hard for the company to maintain the marketing and research spending necessary to stay ahead of the competition.
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SHAMARAN PETROLEUM $0.23 (Toronto symbol SNM; TSINetwork Rating: Speculative) (416-364-8820; www.shamaranpetroleum.com; Shares outstanding: 808.0 million; Market cap: $185.8 million) holds oil and gas exploration interests in Kurdistan. Kurdistan is the most stable area of Iraq, but operating there still entails considerable political risk.
ShaMaran and its partners have struck oil, but they need to do much more drilling to decide whether to bring their new wells into production.
Meanwhile, the company will have to keep making dilutive share issues at today’s low prices to finance further exploration. ShaMaran’s development efforts also face a lot of uncertainty.
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ShaMaran and its partners have struck oil, but they need to do much more drilling to decide whether to bring their new wells into production.
Meanwhile, the company will have to keep making dilutive share issues at today’s low prices to finance further exploration. ShaMaran’s development efforts also face a lot of uncertainty.
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CASH STORE FINANCIAL SERVICES INC. $5.52 (Toronto symbol CSF; TSINetwork Rating: Speculative) (780-408-5110; www.csfinancial.ca; Shares outstanding: 17.4 million; Market cap: $96.0 million; Dividend yield: 8.7%) operates 573 stores under two banners: The Cash Store and Instaloans. Both chains offer consumer payday loans (advances on upcoming paycheques).
The company faces increasing regulations in the payday loan industry. It has also been forced to pay a number of penalties, the latest being a March 2012 order from the B.C. government to refund its customers millions of dollars in overpaid interest and extra charges. These transactions date back to 2009.
Cash Store is now slowing its expansion in Canada and focusing on growing in the less-regulated U.K. market. But it’s far from certain if that strategy will be successful.
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The company faces increasing regulations in the payday loan industry. It has also been forced to pay a number of penalties, the latest being a March 2012 order from the B.C. government to refund its customers millions of dollars in overpaid interest and extra charges. These transactions date back to 2009.
Cash Store is now slowing its expansion in Canada and focusing on growing in the less-regulated U.K. market. But it’s far from certain if that strategy will be successful.
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AMAZON.COM $191.07 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 455.1 million; Market cap: $87.0 billion; No dividends paid) has agreed to buy Kiva Systems for $775 million. Kiva makes small orange robots that help manage warehouse inventory.
Amazon’s shipping volumes continue to rise. In response, the company plans to add 17 more warehouses, bringing its total to 69.
The Kiva purchase will let Amazon better control its labour costs. Amazon can also sell the robots to other retailers. Kiva’s clients already include the Gap, Staples and Saks.
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Amazon’s shipping volumes continue to rise. In response, the company plans to add 17 more warehouses, bringing its total to 69.
The Kiva purchase will let Amazon better control its labour costs. Amazon can also sell the robots to other retailers. Kiva’s clients already include the Gap, Staples and Saks.
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AEROPOSTALE INC. $21.81 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 81.0 million; Market cap: $1.8 billion; No dividends paid) is a mall-based retailer of casual clothing and accessories. It now has 983 stores, and mainly targets 14- to 17-year-old women and men. Its active-oriented clothing has a reputation for high quality and low prices.
Aeropostale also has 71 P.S. from Aeropostale stores, which are aimed at seven- to 12-year-old elementary school students.
In the three months ended January 28, 2012, Aeropostale’s sales fell 3.7% to $808.4 million from $839.3 million a year earlier. Same-store sales declined 9%. Sales from the company’s e-commerce business rose 8%, to $83.2 million from $77.3 million. Earnings dropped 57.6%, to $16.4 million, or $0.44 a share, from $45.4 million, or $0.95 a share.
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Aeropostale also has 71 P.S. from Aeropostale stores, which are aimed at seven- to 12-year-old elementary school students.
In the three months ended January 28, 2012, Aeropostale’s sales fell 3.7% to $808.4 million from $839.3 million a year earlier. Same-store sales declined 9%. Sales from the company’s e-commerce business rose 8%, to $83.2 million from $77.3 million. Earnings dropped 57.6%, to $16.4 million, or $0.44 a share, from $45.4 million, or $0.95 a share.
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