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 $13.55 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 81.9 million; Market cap: $1.1 billion; Dividend yield: 3.0%) rents equipment for monitoring and managing oil and gas rigs. It also sells communication systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas producers and drilling contractors throughout Canada, the U.S., Mexico, Argentina and Australia.
In the three months ended December 31, 2011, Pason’s revenue rose 32.8%, to $97.6 million from $73.5 million a year earlier. Many of the company’s clients increased their drilling, especially for shale gas and oil.
Earnings jumped 201.2%, to $31.7 million, or $0.39 a share, from $10.5 million, or $0.13 a share. The increased drilling pushed up Pason’s earnings. It also let the company raise its prices.
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In the three months ended December 31, 2011, Pason’s revenue rose 32.8%, to $97.6 million from $73.5 million a year earlier. Many of the company’s clients increased their drilling, especially for shale gas and oil.
Earnings jumped 201.2%, to $31.7 million, or $0.39 a share, from $10.5 million, or $0.13 a share. The increased drilling pushed up Pason’s earnings. It also let the company raise its prices.
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CALIAN TECHNOLOGIES $19.74 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 7.6 million; Market cap: $150.0 million; Dividend yield: 5.3%) has acquired Primacy Management of Burlington, Ontario.
Since 2003, Primacy has been designing, building and managing in-store pharmacies for Loblaw. Primacy now operates 112 such clinics in Loblaw’s stores across Canada.
Primacy will add about $3 million a year to Calian’s revenue. To put that figure in perspective, Calian’s revenue was $56.8 million in the quarter ended December 31, 2011. Calian also expects the acquisition to immediately add to its earnings.
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Since 2003, Primacy has been designing, building and managing in-store pharmacies for Loblaw. Primacy now operates 112 such clinics in Loblaw’s stores across Canada.
Primacy will add about $3 million a year to Calian’s revenue. To put that figure in perspective, Calian’s revenue was $56.8 million in the quarter ended December 31, 2011. Calian also expects the acquisition to immediately add to its earnings.
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FIRSTSERVICE CORP. $30.90 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 28.6 million; Market cap: $883.7 million; No dividends paid) serves the following areas of the real estate market: commercial real estate, residential property management and property improvement.
In the three months ended December 31, 2011, the company’s revenue rose 7.8%, to $594.9 million from $552.1 million a year earlier (all figures except share prices in U.S. dollars). Excluding one-time items, earnings per share rose 40.5%, to $0.52 from $0.37.
The company’s $316.4-million debt is a manageable 35.8% of its $883.7-million market cap.
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In the three months ended December 31, 2011, the company’s revenue rose 7.8%, to $594.9 million from $552.1 million a year earlier (all figures except share prices in U.S. dollars). Excluding one-time items, earnings per share rose 40.5%, to $0.52 from $0.37.
The company’s $316.4-million debt is a manageable 35.8% of its $883.7-million market cap.
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IAMGOLD $13.22 (Toronto symbol IMG; TSINetwork Rating: Speculative) (1-888-464-9999; www.iamgold.com; Shares outstanding: 375.9 million; Market cap: $5.0 billion; Dividend yield: 1.5%) reports that its revenue rose 9.2% in the three months ended December 31, 2011, to $481.6 million from $440.9 million a year earlier, largely due to higher gold prices. Earnings per share rose 9.1%, to $0.36 from $0.33.
IAMGold now holds over $1.1 billion U.S. in cash and gold bullion. That gives it lots of options to spur its share price. For example, it could raise exploration spending, make an acquisition or buy back shares.
IAMGold is still a buy.
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IAMGold now holds over $1.1 billion U.S. in cash and gold bullion. That gives it lots of options to spur its share price. For example, it could raise exploration spending, make an acquisition or buy back shares.
IAMGold is still a buy.
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VITERRA $14.65 (Toronto symbol VT; TSINetwork Rating: Average) (1-866-569-4411; www.viterra.ca; Shares outstanding: 371.7 million; Market cap: $5.4 billion; Dividend yield: 1.0%) is up almost 31% since the company said it has received expressions of interest from unnamed parties interested in taking it over.
The stock was our Pick of the Month in the last issue (March 2012) of Stock Pickers Digest. At the time, it was trading at $10.09. That’s a 45.2% gain in one month.
Our view is 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.
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The stock was our Pick of the Month in the last issue (March 2012) of Stock Pickers Digest. At the time, it was trading at $10.09. That’s a 45.2% gain in one month.
Our view is 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.
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SHERRITT INTERNATIONAL $5.58 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com;
Shares outstanding: 296.7 million; Market cap: $1.7 billion; Dividend yield: 2.7%) reports that its revenue rose 10.6% in the three months ended December 31, 2011, to $536.8 million from $485.2 million a year earlier.
Despite the higher revenue, earnings fell 34.2%, to $28.1 million, or $0.10 a share, from $42.7 million, or $0.15 a share. However, without one-time items, such as a charge for the early redemption of debentures, Sherritt would have earned $0.19 in the latest quarter.
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Shares outstanding: 296.7 million; Market cap: $1.7 billion; Dividend yield: 2.7%) reports that its revenue rose 10.6% in the three months ended December 31, 2011, to $536.8 million from $485.2 million a year earlier.
Despite the higher revenue, earnings fell 34.2%, to $28.1 million, or $0.10 a share, from $42.7 million, or $0.15 a share. However, without one-time items, such as a charge for the early redemption of debentures, Sherritt would have earned $0.19 in the latest quarter.
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TRILOGY ENERGY CORP. $27.33 (Toronto symbol TET; TSINetwork Rating: Speculative) (403-290-2900; www.trilogy.com; Shares outstanding: 90.5 million; Market cap: $2.5 billion; Dividend yield: 1.5%) owns oil and gas properties in the Kaybob and Grande Prairie areas of central Alberta. About 64% of Trilogy’s production is natural gas. The remaining 36% is oil.
In the three months ended December 31, 2011, Trilogy produced 28,288 barrels of oil equivalent per day (including natural gas), up 31.3% from 21,544 barrels a year earlier. The higher production pushed up the company’s cash flow per share by 75.9%, to $0.51 from $0.29.
Trilogy drilled 68 wells in 2011, with a 98.5% success rate. That pushed up the company’s production and boosted its reserves by 13%, to 88.6 million barrels from 78.2 million. That’s enough for over 11 years of production.
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In the three months ended December 31, 2011, Trilogy produced 28,288 barrels of oil equivalent per day (including natural gas), up 31.3% from 21,544 barrels a year earlier. The higher production pushed up the company’s cash flow per share by 75.9%, to $0.51 from $0.29.
Trilogy drilled 68 wells in 2011, with a 98.5% success rate. That pushed up the company’s production and boosted its reserves by 13%, to 88.6 million barrels from 78.2 million. That’s enough for over 11 years of production.
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ZARGON OIL & GAS $14.04 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 29.4 million; Market cap: $412.8 million; Dividend yield: 8.6%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. The company’s production is 61% oil and 39% natural gas.
In the three months ended December 31, 2011, Zargon produced 9,278 barrels of oil equivalent per day. That’s down slightly from 9.317 barrels a year earlier. However, that was mainly because the company sold some less important properties. Higher oil prices pushed up Zargon’s cash flow per share by 7.4%, to $0.58 from $0.54 a year earlier.
The company continues to successfully drill horizontal wells in the Alberta Plains North area. Horizontal drilling involves drilling development wells sideways or at an angle to reach isolated pockets of gas or to follow a reservoir spread out in a narrow layer. This method works well in places where conventional drilling is impossible or too expensive.
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In the three months ended December 31, 2011, Zargon produced 9,278 barrels of oil equivalent per day. That’s down slightly from 9.317 barrels a year earlier. However, that was mainly because the company sold some less important properties. Higher oil prices pushed up Zargon’s cash flow per share by 7.4%, to $0.58 from $0.54 a year earlier.
The company continues to successfully drill horizontal wells in the Alberta Plains North area. Horizontal drilling involves drilling development wells sideways or at an angle to reach isolated pockets of gas or to follow a reservoir spread out in a narrow layer. This method works well in places where conventional drilling is impossible or too expensive.
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AASTRA TECHNOLOGIES $21.04 (Toronto symbol AAH; TSINetwork Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 14.0 million; Market cap: $294.6 million; Dividend yield: 3.8%) reports that its sales fell 7.1% in the latest quarter, to $199.7 million from $214.9 million a year earlier. Higher sales in Germany were offset by sales declines in Spain and North America.
Even so, earnings rose 13.5%, to $18.2 million, or $1.30 a share, from $16.0 million, or $1.14 a share. Aastra’s research expenses fell 17.9%, to $14.8 million from $18.0 million, As well, the company narrowed its foreign exchange loss to $1.3 million from $2.6 million a year earlier.
Aastra needs a sustained economic recovery in Europe to raise its sales and further push up its earnings. Still, the stock trades at just 12.0 times the $1.76 a share that the company should earn in 2011. The shares yield a high 3.8%.
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Even so, earnings rose 13.5%, to $18.2 million, or $1.30 a share, from $16.0 million, or $1.14 a share. Aastra’s research expenses fell 17.9%, to $14.8 million from $18.0 million, As well, the company narrowed its foreign exchange loss to $1.3 million from $2.6 million a year earlier.
Aastra needs a sustained economic recovery in Europe to raise its sales and further push up its earnings. Still, the stock trades at just 12.0 times the $1.76 a share that the company should earn in 2011. The shares yield a high 3.8%.
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DOMINO’S PIZZA $39.60 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 57.8 million; Market cap: $2.3 billion; No dividends paid) is the world’s largest chain of pizza stores that offer takeout and delivery. The company operates 9,742 outlets in the U.S. and over 70 in other countries. Franchisees run most of these stores.
In the three months ended January 1, 2012, Domino’s earnings per share rose 33.3%, to $0.52 from $0.39. The company paid more for food ingredients, but that was offset by lower costs for labour, rent and interest.
Sales rose 4.4%, to $501.7 million from $480.0 million. U.S. same-store sales jumped 6.8%. International same-store sales rose 4.7%.
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In the three months ended January 1, 2012, Domino’s earnings per share rose 33.3%, to $0.52 from $0.39. The company paid more for food ingredients, but that was offset by lower costs for labour, rent and interest.
Sales rose 4.4%, to $501.7 million from $480.0 million. U.S. same-store sales jumped 6.8%. International same-store sales rose 4.7%.
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