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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GENUINE PARTS CO. $63 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing sector; Shares outstanding: 155.8 million; Market cap: $9.8 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.1%; TSINetwork Rating: Average; www.genpt.com) is buying Virginia-based Quaker City Motor Parts Co. This privately held company distributes auto parts to 271 NAPA retail stores in several mid-Atlantic states. The company aims to close the deal in May 2012.
Genuine Parts didn’t say how much it is paying, but Quaker City will add $300 million to its annual revenue of $12.5 billion. Owning this distributor will also make it easier for the company to increase its sales on the east coast.
As well, the company has raised its quarterly dividend by 10.0%, to $0.495 a share from $0.45. The new annual rate of $1.98 yields 3.1%.
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Genuine Parts didn’t say how much it is paying, but Quaker City will add $300 million to its annual revenue of $12.5 billion. Owning this distributor will also make it easier for the company to increase its sales on the east coast.
As well, the company has raised its quarterly dividend by 10.0%, to $0.495 a share from $0.45. The new annual rate of $1.98 yields 3.1%.
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SHERWIN-WILLIAMS CO. $107 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 103.8 million; Market cap: $11.1 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.sherwin.com) is North America’s largest paint producer. It also operates 3,450 paint stores, which account for 55% of its sales.
The company earned $441.9 million in 2011, down 4.5% from $462.5 million in 2010. Earnings per share fell 1.7%, to $4.14 from $4.21, on fewer shares outstanding. If you exclude unusual items, such as costs to settle an income tax dispute, earnings per share would have risen 9.9%, to $4.87 from $4.43. Sales rose 12.7%, to $8.8 billion from $7.8 billion.
The stock has gained over 30% in the past year, and now trades at 18.7 times Sherwin’s projected 2012 earnings of $5.72 a share. That’s a high p/e ratio for a company that is so closely tied to the U.S. housing market. Rising oil prices could also squeeze Sherwin’s profit margins (the company uses oil to make its paint).
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The company earned $441.9 million in 2011, down 4.5% from $462.5 million in 2010. Earnings per share fell 1.7%, to $4.14 from $4.21, on fewer shares outstanding. If you exclude unusual items, such as costs to settle an income tax dispute, earnings per share would have risen 9.9%, to $4.87 from $4.43. Sales rose 12.7%, to $8.8 billion from $7.8 billion.
The stock has gained over 30% in the past year, and now trades at 18.7 times Sherwin’s projected 2012 earnings of $5.72 a share. That’s a high p/e ratio for a company that is so closely tied to the U.S. housing market. Rising oil prices could also squeeze Sherwin’s profit margins (the company uses oil to make its paint).
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WAL-MART STORES INC. $61 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.4 billion; Market cap: $207.4 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.walmart.com) is launching a new service that will let its customers upload their DVD and Blu-ray movies to its computer servers. That will let them download their movies from anywhere, and watch them on any device.
Demand for this new service could be strong, particularly as more people use tablet computers and smartphones to watch videos online. It will also help draw more customers to Wal-Mart’s VUDU website, which lets users purchase and download movies.
Wal-Mart is a buy.
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Demand for this new service could be strong, particularly as more people use tablet computers and smartphones to watch videos online. It will also help draw more customers to Wal-Mart’s VUDU website, which lets users purchase and download movies.
Wal-Mart is a buy.
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NEWMONT MINING CORP. $53 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 495.1 million; Market cap: $26.2 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.6%; TSINetwork Rating: Average; www.newmont.com) stopped construction of its 51.35%-owned Conga gold/copper mine in Peru in November 2011. The move was in response to protests by local farmers who fear the mine will contaminate water supplies.
An independent group is now reviewing the mine’s environmental impact, and should release its report in April 2012. Meanwhile, Newmont has cut 6,000 jobs at Conga. That will lower its losses until it can restart the project.
Newmont is a buy.
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An independent group is now reviewing the mine’s environmental impact, and should release its report in April 2012. Meanwhile, Newmont has cut 6,000 jobs at Conga. That will lower its losses until it can restart the project.
Newmont is a buy.
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THE BOEING CO. $75 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 745.7 million; Market cap: $55.9 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.boeing.com) has been forced to slow production of its new 787 Dreamliner passenger jet to fix a minor problem on the fuselages of some planes. Even with this delay, Boeing still feels it will deliver 30 to 40 of these aircraft in 2012.
Demand for Boeing’s other planes is also rising. As a result, its 2011 revenue rose 6.9%, to $68.7 billion from $64.3 billion in 2010. Earnings rose 21.1%, to $4.0 billion from $3.3 billion. Due to more shares outstanding, earnings per share rose 19.5%, to $5.33 from $4.46. Without a favourable tax gain, Boeing would have earned $4.81 a share in 2011.
The company expects to deliver 585 to 600 aircraft in 2012, up from 477 in 2011. However, proposed cuts to U.S. military spending could limit Boeing’s 2012 earnings to $4.52 a share. The stock trades at 16.6 times that figure.
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Demand for Boeing’s other planes is also rising. As a result, its 2011 revenue rose 6.9%, to $68.7 billion from $64.3 billion in 2010. Earnings rose 21.1%, to $4.0 billion from $3.3 billion. Due to more shares outstanding, earnings per share rose 19.5%, to $5.33 from $4.46. Without a favourable tax gain, Boeing would have earned $4.81 a share in 2011.
The company expects to deliver 585 to 600 aircraft in 2012, up from 477 in 2011. However, proposed cuts to U.S. military spending could limit Boeing’s 2012 earnings to $4.52 a share. The stock trades at 16.6 times that figure.
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UNITED TECHNOLOGIES CORP. $83 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 908.9 million; Market cap: $75.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.utc.com) aims to complete its purchase of Goodrich Corp. (New York symbol GR) later this year. Goodrich makes a wide range of aircraft parts, including landing gear, wheels and brakes. It also maintains and repairs planes. United Technologies is paying a total of $18.4 billion, including $1.9 billion of Goodrich’s debt.
Goodrich looks like a good fit with United Technologies’ other aerospace operations: Pratt & Whitney aircraft engines; Hamilton Sundstrand aircraft controls; and Sikorsky helicopters. Goodrich will add $8 billion to United Technologies’ yearly revenue.
Meanwhile, the company earned $5.0 billion in 2011, up 13.9% from $4.4 billion in 2010. Earnings per share rose 15.8%, to $5.49 from $4.74, on fewer shares outstanding. If you exclude writedowns of investments and other unusual items, earnings per share would have risen 9.9%, to $5.53 from $5.03. Revenue rose 7.1%, to $58.2 billion from $54.3 billion.
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Goodrich looks like a good fit with United Technologies’ other aerospace operations: Pratt & Whitney aircraft engines; Hamilton Sundstrand aircraft controls; and Sikorsky helicopters. Goodrich will add $8 billion to United Technologies’ yearly revenue.
Meanwhile, the company earned $5.0 billion in 2011, up 13.9% from $4.4 billion in 2010. Earnings per share rose 15.8%, to $5.49 from $4.74, on fewer shares outstanding. If you exclude writedowns of investments and other unusual items, earnings per share would have risen 9.9%, to $5.53 from $5.03. Revenue rose 7.1%, to $58.2 billion from $54.3 billion.
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TERADATA CORP. $68 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 168.3 million; Market cap: $11.4 billion; Price-to-sales ratio: 4.8; No dividends paid; TSINetwork Rating: Average; www.teradata.com) saw its revenue rise 22.0% in 2011, to $2.4 billion from $1.9 billion in 2010. Earnings per share rose 24.7%, to $2.32 from $1.86.
The company should continue to profit from strong demand for its analytics services, which help businesses gather and analyze large amounts of data, including customer purchasing patterns. However, at over 27 times earnings, the stock could drop suddenly if Teradata’s earnings fail to live up to expectations.
Teradata is a hold.
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The company should continue to profit from strong demand for its analytics services, which help businesses gather and analyze large amounts of data, including customer purchasing patterns. However, at over 27 times earnings, the stock could drop suddenly if Teradata’s earnings fail to live up to expectations.
Teradata is a hold.
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ADOBE SYSTEMS INC. $34 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 496.2 million; Market cap: $16.9 billion; Price-to-sales ratio: 3.9; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) makes software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use Adobe’s software to create print publications and web pages. Adobe gets 30% of its sales from Europe.
In its fiscal 2012 first quarter, which ended March 2, 2012, Adobe’s earnings fell 21.1%, to $185.2 million, or $0.37 a share. A year earlier, it earned $234.6 million, or $0.46. 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 behind the lower sales and earnings.
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In its fiscal 2012 first quarter, which ended March 2, 2012, Adobe’s earnings fell 21.1%, to $185.2 million, or $0.37 a share. A year earlier, it earned $234.6 million, or $0.46. 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 behind the lower sales and earnings.
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SYMANTEC CORP. $18 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 729.4 million; Market cap: $13.1 billion; Price-to-sales ratio: 2.0; No dividends paid; TSINetwork Rating: Average; www.symantec.com) sells anti-virus and email filtering software to businesses and consumers.
In its fiscal 2012 third quarter, which ended December 30, 2011, Symantec’s earnings rose 15.4%, to $314 million from $272 million a year earlier. Earnings per share gained 20.0%, to $0.42 from $0.35, on fewer shares outstanding. These figures exclude asset writedowns and costs to integrate acquisitions.
Sales rose 6.9%, to $1.7 billion from $1.6 billion. Symantec gets 52% of its sales from overseas. If you disregard the positive impact of exchange rates, sales would have risen 6% in the quarter.
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In its fiscal 2012 third quarter, which ended December 30, 2011, Symantec’s earnings rose 15.4%, to $314 million from $272 million a year earlier. Earnings per share gained 20.0%, to $0.42 from $0.35, on fewer shares outstanding. These figures exclude asset writedowns and costs to integrate acquisitions.
Sales rose 6.9%, to $1.7 billion from $1.6 billion. Symantec gets 52% of its sales from overseas. If you disregard the positive impact of exchange rates, sales would have risen 6% in the quarter.
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NORDSTROM INC. $55 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 207.9 million; Market cap: $11.4 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.0%; TSINetwork Rating: Average; www.nordstrom.com) is now offering free shipping for all purchases made at over 100 of its 225 upscale department stores; it already offers free shipping on online purchases. Free shipping adds to its costs, but Nordstrom feels this move will give it an edge over its main rivals.
Meanwhile, Nordstrom’s sales rose 16.2% in February 2012, to $704 million from $606 million in February 2011. Same-store sales rose 10.2%.
Nordstrom is a buy.
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Meanwhile, Nordstrom’s sales rose 16.2% in February 2012, to $704 million from $606 million in February 2011. Same-store sales rose 10.2%.
Nordstrom is a buy.
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