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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SHERWIN-WILLIAMS CO. $84 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 103.8 million; Market cap: $8.7 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.sherwinwilliams.com) recently raised its prices to offset the rising cost of oil (Sherwin needs oil to make its paints). That’s partly why its sales rose 14.4% in the quarter ended September 30, 2011, to $2.5 billion from $2.2 billion a year earlier. Recent acquisitions have also fuelled its growth.
However, it will take several months for Sherwin to realize the full benefits of its higher selling prices. Meanwhile, it continues to integrate its recent purchases. As a result, earnings rose a slower pace of 2.6%, to $179.9 million, or $1.71 a share. A year earlier, it earned $175.3 million, or $1.60 a share.
Sherwin recently settled a tax dispute with the IRS. As a result, it will incur a one-time charge of $75.0 million, or $0.72 a share, in the fourth quarter of 2011.
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However, it will take several months for Sherwin to realize the full benefits of its higher selling prices. Meanwhile, it continues to integrate its recent purchases. As a result, earnings rose a slower pace of 2.6%, to $179.9 million, or $1.71 a share. A year earlier, it earned $175.3 million, or $1.60 a share.
Sherwin recently settled a tax dispute with the IRS. As a result, it will incur a one-time charge of $75.0 million, or $0.72 a share, in the fourth quarter of 2011.
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WINDSTREAM CORP. $12 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 515.8 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 8.3%; TSINetwork Rating: Average; www.windstream.com) has completed its purchase of PAETEC Holding Corp., which sells telecommunication services to businesses in 46 states. Windstream paid $891 million in stock and assumed $1.4 billion of PAETEC’s debt. That gives the deal a total value of $2.3 billion.
This is the latest in a series of acquisitions for Windstream. Its recent purchases pushed up its revenue by 6.0% in the third quarter of 2011, to $1.0 billion from $965.8 million a year earlier. However, the costs of integrating these new operations cut its earnings by 16.1%, to $71.5 million, or $0.14 a share, from $85.2 million, or $0.18 a share.
As a result of the PAETEC purchase, Windstream will now get 70% of its revenue from selling highspeed Internet and business services. That cuts its reliance on its slow-growing home phone business. As well, the company can use PAETEC’s losses to lower its tax bill over the next five years. That should let its keep paying quarterly dividends of $0.25 a share, for an 8.3% annualized yield.
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This is the latest in a series of acquisitions for Windstream. Its recent purchases pushed up its revenue by 6.0% in the third quarter of 2011, to $1.0 billion from $965.8 million a year earlier. However, the costs of integrating these new operations cut its earnings by 16.1%, to $71.5 million, or $0.14 a share, from $85.2 million, or $0.18 a share.
As a result of the PAETEC purchase, Windstream will now get 70% of its revenue from selling highspeed Internet and business services. That cuts its reliance on its slow-growing home phone business. As well, the company can use PAETEC’s losses to lower its tax bill over the next five years. That should let its keep paying quarterly dividends of $0.25 a share, for an 8.3% annualized yield.
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CHEVRON CORP. $100 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.0 billion; Market cap: $200.0 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.chevron.com) plans to spend $32.7 billion on capital upgrades in 2012. That’s up 25.8% from the $26.0 billion it will probably spend in 2011.
About 87% of the 2012 spending will go toward oil and gas exploration and upgrades of existing projects and new developments. For example, Chevron’s new liquefied natural gas plants in Australia will increase its daily production by 13% by 2016.
Chevron is a buy.
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About 87% of the 2012 spending will go toward oil and gas exploration and upgrades of existing projects and new developments. For example, Chevron’s new liquefied natural gas plants in Australia will increase its daily production by 13% by 2016.
Chevron is a buy.
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MOLSON COORS BREWING CO. $42 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 181.1 million; Market cap: $7.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 3.0%; TSINetwork Rating: Average; www.molsoncoors.com) is the world’s fifth-largest brewer by volume.
The company continues to realize savings from the June 2008 merger of its operations in the U.S. with those of rival brewer SABMiller to form MillerCoors.
Including its share of the savings from MillerCoors, Molson Coors cut its overall costs by $29 million in the quarter ended September 24, 2011. However, those savings were offset by rising ingredient costs, which pushed down earnings by 11.2%, to $212.4 million, or $1.14 a share. A year earlier, Molson Coors earned $239.1 million, or $1.28 a share.
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The company continues to realize savings from the June 2008 merger of its operations in the U.S. with those of rival brewer SABMiller to form MillerCoors.
Including its share of the savings from MillerCoors, Molson Coors cut its overall costs by $29 million in the quarter ended September 24, 2011. However, those savings were offset by rising ingredient costs, which pushed down earnings by 11.2%, to $212.4 million, or $1.14 a share. A year earlier, Molson Coors earned $239.1 million, or $1.28 a share.
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PEPSICO INC. $64 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $102.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.pepsico.com) is the world’s second-largest soft-drink maker after Coca-Cola. It also makes other products, such as Frito-Lay snack foods, Tropicana fruit juices and Quaker Oats.
PepsiCo recently raised its selling prices in response to rising ingredient costs. That’s the main reason why its sales rose 13.3% in the quarter ended September 3, 2011, to $17.6 billion from $15.5 billion a year earlier. In June 2011, PepsiCo paid $3.8 billion for Wimm-Bill-Dann, Russia’s largest dairy and juice company. This accounted for a third of the sales gain. Without unusual items, mainly costs to integrate recent acquisitions, earnings per share rose rose 7.4%, to $1.31 from $1.22.
PepsiCo continues to expand internationally. In November 2011, it paid an undisclosed sum for privately held Grupo Mabel, Brazil’s second-largest maker of cookies, crackers and snack foods. This business complements the foods that PepsiCo already sells in Brazil, including Frito-Lay chips (sold under the Elma Chips brand) and Quaker Oats snacks.
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PepsiCo recently raised its selling prices in response to rising ingredient costs. That’s the main reason why its sales rose 13.3% in the quarter ended September 3, 2011, to $17.6 billion from $15.5 billion a year earlier. In June 2011, PepsiCo paid $3.8 billion for Wimm-Bill-Dann, Russia’s largest dairy and juice company. This accounted for a third of the sales gain. Without unusual items, mainly costs to integrate recent acquisitions, earnings per share rose rose 7.4%, to $1.31 from $1.22.
PepsiCo continues to expand internationally. In November 2011, it paid an undisclosed sum for privately held Grupo Mabel, Brazil’s second-largest maker of cookies, crackers and snack foods. This business complements the foods that PepsiCo already sells in Brazil, including Frito-Lay chips (sold under the Elma Chips brand) and Quaker Oats snacks.
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TEXAS INSTRUMENTS INC. $28 (New York symbol TXN [Switches to Nasdaq on January 1, 2012, symbol TXN]; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $30.8 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.4%; TSINetwork Rating: Average; www.ti.com) is seeing weaker demand for its analog chips, which convert sound and images into digital signals that computers can understand.
As a result, earnings per share will probably fall to $1.85 in 2011 from $2.62 in 2010. The stock trades at 15.1 times the new estimate. That’s still a reasonable p/e, particularly as chip sales should rebound in 2012 as manufacturers use up their inventories.
Texas Instruments is a buy.
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As a result, earnings per share will probably fall to $1.85 in 2011 from $2.62 in 2010. The stock trades at 15.1 times the new estimate. That’s still a reasonable p/e, particularly as chip sales should rebound in 2012 as manufacturers use up their inventories.
Texas Instruments is a buy.
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DUN & BRADSTREET CORP. $70 (New York symbol DNB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 48.6 million; Market cap: $3.4 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.1%; TSINetwork Rating: Average; www.dnb.com) is the world’s largest provider of credit reports on individual companies.
Dun & Bradstreet continues to launch new online services. Demand for these products is strong, because they give investors better access to the most current data. In addition, the company’s expanding online business cuts its printing and postage costs.
These new products helped push up earnings by 15.2% in the quarter ended September 30, 2011, to $69.9 million from $60.7 million a year earlier. Earnings per share rose 17.4%, to $1.42 from $1.21, on fewer shares outstanding. Revenue rose 11.0%, to $439.4 million from $396.0 million.
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Dun & Bradstreet continues to launch new online services. Demand for these products is strong, because they give investors better access to the most current data. In addition, the company’s expanding online business cuts its printing and postage costs.
These new products helped push up earnings by 15.2% in the quarter ended September 30, 2011, to $69.9 million from $60.7 million a year earlier. Earnings per share rose 17.4%, to $1.42 from $1.21, on fewer shares outstanding. Revenue rose 11.0%, to $439.4 million from $396.0 million.
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MOODY’S CORP. $32 (New York symbol MCO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 222.0 million; Market cap: $7.1 billion; Price-to-sales ratio: 3.2; Dividend yield: 2.0%; TSINetwork Rating: Average; www.moodys.com) provides credit ratings and other information on bonds and other securities. The company gets two-thirds of its revenue from credit ratings. The remaining third comes from its analytics businesses, which mainly sell credit-assessment software.
There have been fewer issues of speculative-grade bonds and bonds backed by mortgages due to concerns over high European debt levels. That has hurt demand for the company’s credit ratings.
That’s why Moody’s is continuing to expand beyond credit ratings. To that end, it recently bought a majority stake in Copal Partners, a private firm that sells research and other services to institutional investors. Moody’s did not say how much it paid, but Copal has about $50 million of annual revenue.
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There have been fewer issues of speculative-grade bonds and bonds backed by mortgages due to concerns over high European debt levels. That has hurt demand for the company’s credit ratings.
That’s why Moody’s is continuing to expand beyond credit ratings. To that end, it recently bought a majority stake in Copal Partners, a private firm that sells research and other services to institutional investors. Moody’s did not say how much it paid, but Copal has about $50 million of annual revenue.
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BAXTER INTERNATIONAL INC. $48 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 563.9 million; Market cap: $27.1 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.8%; TSINetwork Rating: Average; www.baxter.com) has purchased Baxa Corp., which makes products that improve the safety and effectiveness of oral and intravenous drugs. This company’s expertise will Baxter’s drug-delivery devices work better.
Baxter paid $380 million for Baxa. That’s equal to 61% of the $624 million that Baxter earned before unusual items in the third quarter of 2011. The latest earnings are up 4.9% from $595 million a year earlier. Earnings per share rose 7.9%, to $1.09 from $1.01, on fewer shares outstanding.
In addition, the company raised its quarterly dividend by 8.1%, to $0.335 from $0.31 a share. The new annual rate of $1.34 yields 2.8%.
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Baxter paid $380 million for Baxa. That’s equal to 61% of the $624 million that Baxter earned before unusual items in the third quarter of 2011. The latest earnings are up 4.9% from $595 million a year earlier. Earnings per share rose 7.9%, to $1.09 from $1.01, on fewer shares outstanding.
In addition, the company raised its quarterly dividend by 8.1%, to $0.335 from $0.31 a share. The new annual rate of $1.34 yields 2.8%.
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FORD MOTOR CO. $10 (New York symbol F; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 3.8 billion; Market cap: $38.0 billion; Price-to-sales ratio: 0.3; Dividend yield: 2.0%; TSINetwork Rating: Extra Risk; www.ford.com) stopped paying dividends in June 2006 to conserve cash for a major restructuring plan.
This plan helped turn the company around, and it is now seeing stronger vehicle sales. As a result, it will resume quarterly dividend payments of $0.05 a share. The $0.20 annual rate yields 2.0%.
In light of the new dividend, we’ve upgraded Ford’s TSINetwork Rating from Speculative to Extra Risk.
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This plan helped turn the company around, and it is now seeing stronger vehicle sales. As a result, it will resume quarterly dividend payments of $0.05 a share. The $0.20 annual rate yields 2.0%.
In light of the new dividend, we’ve upgraded Ford’s TSINetwork Rating from Speculative to Extra Risk.
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