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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MOODY’S CORP. $42 (New York symbol MCO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 222.9 million; Market cap: $9.4 billion; Price-to-sales ratio: 4.1; Dividend yield: 1.5%; TSINetwork Rating: Average; www.moodys.com) continues to see rising demand for its credit ratings as the global economy improves. In 2011, the company’s earnings rose 12.1%, to $564.4 million from $503.3 million in 2010. Moody’s spent $333.8 million on share buybacks during the year. Because of fewer shares outstanding, earnings per share rose 15.5%, to $2.46 from $2.13. Revenue rose 12.2%, to $2.3 billion from $2.0 billion.
For 2012, Moody’s expects to earn $2.68 a share. The stock trades at 15.7 times that estimate. The company also raised its quarterly dividend by 14.3%, to $0.16 a share from $0.14. The new annual rate of $0.64 yields 1.5%.
Moody’s is a buy.
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For 2012, Moody’s expects to earn $2.68 a share. The stock trades at 15.7 times that estimate. The company also raised its quarterly dividend by 14.3%, to $0.16 a share from $0.14. The new annual rate of $0.64 yields 1.5%.
Moody’s is a buy.
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WESTERN UNION CO. $18 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 620.3 million; Market cap: $11.2 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.westernunion.com) provides money-transfer and foreign-exchange services in over 200 countries.
In November 2011, the company paid $967.8 million for the business-payments division of U.K.-based Travelex Holdings Ltd. This subsidiary processes payments for 35,000 businesses in 14 countries.
These operations helped push up Western Union’s revenue by 5.8% in 2011, to $5.5 billion from $5.2 billion in 2010. If you exclude integration costs and other unusual items, earnings rose 4.9%, to $995.8 million from $949.2 million. Earnings per share rose 10.6%, to $1.57 from $1.42, on fewer shares outstanding.
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In November 2011, the company paid $967.8 million for the business-payments division of U.K.-based Travelex Holdings Ltd. This subsidiary processes payments for 35,000 businesses in 14 countries.
These operations helped push up Western Union’s revenue by 5.8% in 2011, to $5.5 billion from $5.2 billion in 2010. If you exclude integration costs and other unusual items, earnings rose 4.9%, to $995.8 million from $949.2 million. Earnings per share rose 10.6%, to $1.57 from $1.42, on fewer shares outstanding.
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T. ROWE PRICE GROUP INC. $64 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 253.5 million; Market cap: $16.2 billion; Price-to-sales ratio: 6.0; Dividend yield: 2.1%; TSINetwork Rating: Average; www.troweprice.com) sells mutual funds and wealth management services.
On December 31, 2011, the company had $489.5 billion of assets under management, up from $482.0 billion a year earlier.
That’s mainly because T. Rowe Price sold $11.0 billion of mutual funds (net of redemptions) during the year. It continues to see strong demand for its “Retirement Funds,” which invest in its other funds and automatically adjust the buyer’s portfolio balance according to their age. Retirement Funds accounted for 68% of the company’s mutual fund sales in 2011.
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On December 31, 2011, the company had $489.5 billion of assets under management, up from $482.0 billion a year earlier.
That’s mainly because T. Rowe Price sold $11.0 billion of mutual funds (net of redemptions) during the year. It continues to see strong demand for its “Retirement Funds,” which invest in its other funds and automatically adjust the buyer’s portfolio balance according to their age. Retirement Funds accounted for 68% of the company’s mutual fund sales in 2011.
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EBAY INC. $38 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $49.4 billion; Price-to-sales ratio: 2.7; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) operates the world’s largest auction website, with over 99 million users. It also processes online financial transactions, mostly through its PayPal subsidiary.
In 2011, eBay’s revenue rose 27.3%, to $11.7 billion from $9.2 billion in 2010. Strong international growth pushed up PayPal’s revenue by 28.4%. eBay’s auction websites saw a 16.1% revenue gain.
PayPal continues to grow rapidly; the division now accounts for 38% of eBay’s total revenue.
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In 2011, eBay’s revenue rose 27.3%, to $11.7 billion from $9.2 billion in 2010. Strong international growth pushed up PayPal’s revenue by 28.4%. eBay’s auction websites saw a 16.1% revenue gain.
PayPal continues to grow rapidly; the division now accounts for 38% of eBay’s total revenue.
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APPLE INC. $603 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 932.4 million; Market cap: $562.2 billion; Price-to-sales ratio: 4.4; Dividend yield: 1.8%; TSINetwork Rating: Average; www.apple.com) is up about 50% since the start of 2012, mainly due to strong sales of its iPhone smartphones and iPad tablet computers.
The company now plans to reward its shareholders by returning some of its $97.6 billion, or $104.70 a share, in cash and investments (as of the end of 2011.)
In the fourth quarter of its current fiscal year, which ends September 30, 2012, Apple will start paying quarterly dividends of $2.65 a share; the annual rate of $10.60 yields 1.8%. Apple also plans to buy back $10 billion of its shares over the next three years.
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The company now plans to reward its shareholders by returning some of its $97.6 billion, or $104.70 a share, in cash and investments (as of the end of 2011.)
In the fourth quarter of its current fiscal year, which ends September 30, 2012, Apple will start paying quarterly dividends of $2.65 a share; the annual rate of $10.60 yields 1.8%. Apple also plans to buy back $10 billion of its shares over the next three years.
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CINTAS CORP. $39 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 129.7 million; Market cap: $5.1 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.cintas.com) provides a wide range of products and services to over 900,000 businesses, mainly in North America.
The company gets 71% of its revenue from renting uniforms, which it makes and cleans at its own factories, and renting a wide variety of related products, such as mats, towels, mops and cleaning supplies. It gets a further 11% of its revenue by selling uniforms.
In the past few years, the company has branched out into new areas. For example, it now gets 10% of its revenue by providing first aid kits, fire extinguishers, sprinklers and emergency-exit lights to businesses. In addition, Cintas helps its clients comply with local safety regulations.
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The company gets 71% of its revenue from renting uniforms, which it makes and cleans at its own factories, and renting a wide variety of related products, such as mats, towels, mops and cleaning supplies. It gets a further 11% of its revenue by selling uniforms.
In the past few years, the company has branched out into new areas. For example, it now gets 10% of its revenue by providing first aid kits, fire extinguishers, sprinklers and emergency-exit lights to businesses. In addition, Cintas helps its clients comply with local safety regulations.
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COMPUTER MODELLING GROUP $16.07 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 37.1 million; Market cap: $596.2 million; Dividend yield: 3.2%) sells consulting services and software that help oil and gas producers use advanced recovery techniques to get more out of their existing wells. The company has customers in over 50 countries.
In the three months ended December 31, 2011, Computer Modelling’s revenue rose 31.8%, to $15.9 million from $12.1 million a year earlier. Software licence sales rose 39.1%, while consulting and professional services revenue declined 12.1%, mainly because Computer Modelling consulted on some large one-time projects in the year-earlier quarter.
Earnings jumped 62.5%, to $5.8 million, or $0.16 a share, from $3.6 million, or $0.10 a share.
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In the three months ended December 31, 2011, Computer Modelling’s revenue rose 31.8%, to $15.9 million from $12.1 million a year earlier. Software licence sales rose 39.1%, while consulting and professional services revenue declined 12.1%, mainly because Computer Modelling consulted on some large one-time projects in the year-earlier quarter.
Earnings jumped 62.5%, to $5.8 million, or $0.16 a share, from $3.6 million, or $0.10 a share.
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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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