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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INTACT FINANCIAL CORP. $60.00 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341-1464; www.intactfc.com; Shares outstanding: 129.6 million; Market cap: $7.8 billion; Dividend yield: 2.7%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.
In the three months ended December 31, 2011, Intact’s revenue rose 48.7%, to $1.58 billion from $1.06 billion. That was mainly due to AXA Canada, which Intact bought from Paris-based ASX Group for $2.6 billion last year.
AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.
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In the three months ended December 31, 2011, Intact’s revenue rose 48.7%, to $1.58 billion from $1.06 billion. That was mainly due to AXA Canada, which Intact bought from Paris-based ASX Group for $2.6 billion last year.
AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.
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NEW GOLD $11.17 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 461.4 million; Market cap: $5.2 billion; No dividends paid) produced a record 387,155 ounces of gold in 2011, up 1.1% from 369,077 ounces in 2010.
The company’s production could rise as high as 445,000 ounces in 2012. That growth will come mostly from its New Afton mine, which should start up in the middle of this year.
Even if the New Gold doesn’t expand its mines or make acquisitions, its production could top one million ounces within six years. Most of that rise will come from the successful development of the Blackwater project, which could hold up to 6.8 million ounces of gold.
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The company’s production could rise as high as 445,000 ounces in 2012. That growth will come mostly from its New Afton mine, which should start up in the middle of this year.
Even if the New Gold doesn’t expand its mines or make acquisitions, its production could top one million ounces within six years. Most of that rise will come from the successful development of the Blackwater project, which could hold up to 6.8 million ounces of gold.
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SYMANTEC CORP. $17.94 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 737.2 million; Market cap: $13.2 billion; No dividends paid) reports that its earnings per share gained 20.0% in the three months ended December 30, 2011, to $0.42 from $0.35. Sales rose 6.9%, to $1.72 billion from $1.6 billion.
Demand for security software will likely remain steady due to rising concerns about identity theft and online intruders. However, a shortage of hard drives due to flooding in Thailand is dampening computer sales. That would hurt Symantec, because the company gets 85% of its sales to consumers from software that is preinstalled on new computers. Consumers account for about 30% of Symantec’s overall sales.
As well, economic uncertainty will probably weigh on sales in Europe, which supplies around 25% of Symantec’s overall sales.
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Demand for security software will likely remain steady due to rising concerns about identity theft and online intruders. However, a shortage of hard drives due to flooding in Thailand is dampening computer sales. That would hurt Symantec, because the company gets 85% of its sales to consumers from software that is preinstalled on new computers. Consumers account for about 30% of Symantec’s overall sales.
As well, economic uncertainty will probably weigh on sales in Europe, which supplies around 25% of Symantec’s overall sales.
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WESTJET AIRLINES $13.95 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 130.8 million; Market cap: $1.8 billion; Dividend yield: 1.7%) reports that its revenue rose 12.9% in the three months ended December 31, 2011, to $781.5 million from $692.2 million a year earlier.
Demand for the company’s flights remains high, and it has entered into new partnerships with other airlines; these were the main reasons for the higher revenue.
Earnings fell 4.3%, to $35.6 million from $37.2 million. Higher fuel prices were the main reason for the decline. However, earnings per share were unchanged at $0.26, due to fewer shares outstanding. The company has also raised its quarterly dividend by 20%, to $0.06 from $0.05. The shares now yield 1.7%.
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Demand for the company’s flights remains high, and it has entered into new partnerships with other airlines; these were the main reasons for the higher revenue.
Earnings fell 4.3%, to $35.6 million from $37.2 million. Higher fuel prices were the main reason for the decline. However, earnings per share were unchanged at $0.26, due to fewer shares outstanding. The company has also raised its quarterly dividend by 20%, to $0.06 from $0.05. The shares now yield 1.7%.
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CHESAPEAKE ENERGY $23.02 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 659.3 million; Market cap: $15.2 billion; Dividend yield: 1.5%) plans to cut its daily natural gas production by 8% due to low gas prices. That will take about 500 million cubic feet per day off the market. Chesapeake is the second-largest natural gas producer in the U.S.
Chesapeake will now shift the focus of its drilling to oil and natural gas liquids (NGLs), which are broken down into ethane, propane and butane and sold to a variety of customers. For example, ethane is used to make a host of everyday products, like grocery and garbage bags, toys, medical tubing and so on. NGLs are typically priced in relation to crude oil.
Chesapeake Energy is still a buy.
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Chesapeake will now shift the focus of its drilling to oil and natural gas liquids (NGLs), which are broken down into ethane, propane and butane and sold to a variety of customers. For example, ethane is used to make a host of everyday products, like grocery and garbage bags, toys, medical tubing and so on. NGLs are typically priced in relation to crude oil.
Chesapeake Energy is still a buy.
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DEVON ENERGY CORP. $71.70 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235-3611; www.dvn.com; Shares outstanding: 403.9 million; Market cap: $29.0 billion; Dividend yield: 1.0%) is one of the largest U.S.-based oil and natural-gas explorers and producers. Its production mix is 65% gas and 35% oil.
In May 2011, Devon completed the sale of its Brazilian operations for $3.2 billion. It has now sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop.
In all, the company received over $8 billion in after-tax proceeds from these sales. It’s using these funds to buy back shares, purchase properties and pay down debt. So far, it has bought back $3.5 billion of its shares. Its long-term debt is $6.0 billion, but that’s just 20.7% of its $29.0-billion market cap. The company holds cash of $7.1 billion, or $17.27 a share. As well, Devon recently sold a one-third interest in five shale oil and gas fields to giant Chinese state-owned petroleum and chemical company Sinopec (symbol SNP on New York) for $900 million. In addition, Sinopec will pay up to 70% of Devon’s share of the development costs at the five fields, up to $1.6 billion
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In May 2011, Devon completed the sale of its Brazilian operations for $3.2 billion. It has now sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop.
In all, the company received over $8 billion in after-tax proceeds from these sales. It’s using these funds to buy back shares, purchase properties and pay down debt. So far, it has bought back $3.5 billion of its shares. Its long-term debt is $6.0 billion, but that’s just 20.7% of its $29.0-billion market cap. The company holds cash of $7.1 billion, or $17.27 a share. As well, Devon recently sold a one-third interest in five shale oil and gas fields to giant Chinese state-owned petroleum and chemical company Sinopec (symbol SNP on New York) for $900 million. In addition, Sinopec will pay up to 70% of Devon’s share of the development costs at the five fields, up to $1.6 billion
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CIMAREX ENERGY $81.59 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 85.7 million; Market cap: $7.0 billion; Dividend yield: 0.5%) produces and explores for oil and natural gas. Gas makes up 56% of its output.
Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas; the Permian Basin of western Texas and southeastern New Mexico; and the Texas Gulf Coast.
In the three months ended December 31, 2011, Cimarex’s production averaged 601.4 million cubic feet of natural gas equivalent per day (including oil). That’s down slightly from 604.5 million cubic feet a year earlier. The company did not offset natural declines at its Gulf Coast wells with new production.
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Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas; the Permian Basin of western Texas and southeastern New Mexico; and the Texas Gulf Coast.
In the three months ended December 31, 2011, Cimarex’s production averaged 601.4 million cubic feet of natural gas equivalent per day (including oil). That’s down slightly from 604.5 million cubic feet a year earlier. The company did not offset natural declines at its Gulf Coast wells with new production.
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CHIPOTLE MEXICAN GRILL $375.73 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 31.3 million; Market cap: $11.8 billion; No dividends paid) reported 23.7% higher sales in the three months ended December 31, 2011, to $596.7 million from $482.5 million a year earlier. Earnings rose 23.2%, to $1.81 a share from $1.47 a share.
The company will open 155 to 165 new restaurants in 2012. That will push up its sales. However, rising food costs will keep putting pressure on its profit margins. It’s uncertain if Chipotle can further raise its prices to offset those increases.
Chipotle trades at nearly 46 times its forecast earnings for this year. That’s a high ratio that leaves the stock vulnerable if it runs into any short-term problems. Still, it’s a well-established chain with a growing following, especially among health-conscious, environmentally aware baby boomers.
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The company will open 155 to 165 new restaurants in 2012. That will push up its sales. However, rising food costs will keep putting pressure on its profit margins. It’s uncertain if Chipotle can further raise its prices to offset those increases.
Chipotle trades at nearly 46 times its forecast earnings for this year. That’s a high ratio that leaves the stock vulnerable if it runs into any short-term problems. Still, it’s a well-established chain with a growing following, especially among health-conscious, environmentally aware baby boomers.
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AMAZON.COM $184.47 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 454.8 million; Market cap: $83.9 billion; No dividends paid) is a major online retailer. Books, music and videos make up about 40% of its sales. Other products, including electronics, computer games and toys, make up the other 60%. Amazon Marketplace lets other companies sell their products through Amazon’s websites.
In the three months ended December 31, 2011, Amazon’s earnings fell 57.5%, to $177 million, or $0.39 a share. A year earlier, it earned $416 million, or $0.93 a share. The decline came despite a 34.6% jump in sales, to $17.4 billion from $12.9 billion.
During the quarter, the company spent $862 million on “technology and content,” up 66.1% from $519 million a year earlier. That was the main reason for the lower earnings. This additional spending included investments in new models of its Kindle electronic book reader, including the Kindle Fire tablet computer.
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In the three months ended December 31, 2011, Amazon’s earnings fell 57.5%, to $177 million, or $0.39 a share. A year earlier, it earned $416 million, or $0.93 a share. The decline came despite a 34.6% jump in sales, to $17.4 billion from $12.9 billion.
During the quarter, the company spent $862 million on “technology and content,” up 66.1% from $519 million a year earlier. That was the main reason for the lower earnings. This additional spending included investments in new models of its Kindle electronic book reader, including the Kindle Fire tablet computer.
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WYNDHAM WORLDWIDE $42.99 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973-753-6000; www.wyndhamworldwide.com; Shares outstanding: 154.0 million; Market cap: $6.6 billion; Dividend yield: 2.1%) is one of the world’s largest hospitality companies, with 7,205 franchised hotels worldwide. Aside from Wyndham and Ramada, it owns a variety of other brands, including Days Inn, Super 8, Wingate, Baymont Inn & Suites, Microtel Inns & Suites, Hawthorn Suites, Howard Johnson, Travelodge and AmeriHost Inn. In addition to hotels, Wyndham manages vacation resorts, rental properties, luxury clubs and time-shares. Wyndham now has 100,000 vacation rental properties worldwide. This wide range of operations gives the company more consistent cash flow than most of its competitors, which mainly focus on hotels.
In the three months ended December 31, 2011, Wyndham’s revenue rose 6.7%, to $1.0 billion from $937.0 million. The company gets most of its revenue from vacation rather than business travel, and vacation bookings rose in the latest quarter. That helped push up Wyndham’s occupancy rate by 3.8%.
Before one-time items, earnings rose 2.2%, to $0.47 a share from $0.46. Wyndham continues to buy back its shares. In the latest quarter, it repurchased 6.7 million shares for $225 million. In all of 2011, it bought back 28.7 million shares for $902 million. The company has also raised its quarterly dividend by 53.3%, to $0.23 from $0.15. It now yields 2.1%.
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In the three months ended December 31, 2011, Wyndham’s revenue rose 6.7%, to $1.0 billion from $937.0 million. The company gets most of its revenue from vacation rather than business travel, and vacation bookings rose in the latest quarter. That helped push up Wyndham’s occupancy rate by 3.8%.
Before one-time items, earnings rose 2.2%, to $0.47 a share from $0.46. Wyndham continues to buy back its shares. In the latest quarter, it repurchased 6.7 million shares for $225 million. In all of 2011, it bought back 28.7 million shares for $902 million. The company has also raised its quarterly dividend by 53.3%, to $0.23 from $0.15. It now yields 2.1%.
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