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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CAMECO CORP. $17.79 (Toronto symbol CCO; TSINetwork Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 390.0 million; Market cap: $6.9 billion; Dividend yield 2.3%) has dropped its hostile takeover bid for Hathor Exploration (symbol HAT on Toronto). However, Cameco could still profit from Hathor’s uranium properties (see below).
Hathor’s main exploration properties, including its Midwest Northeast property, are on the east side of the Athabasca Basin. This region contains all of Canada’s producing uranium mines and accounts for 23% of global production.
Cameco holds cash of $1.2 billion, or $3.30 a share, so it can afford to make acquisitions that enhance its growth prospects. However, it dropped its Hathor bid because it felt the price had risen too high.
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Hathor’s main exploration properties, including its Midwest Northeast property, are on the east side of the Athabasca Basin. This region contains all of Canada’s producing uranium mines and accounts for 23% of global production.
Cameco holds cash of $1.2 billion, or $3.30 a share, so it can afford to make acquisitions that enhance its growth prospects. However, it dropped its Hathor bid because it felt the price had risen too high.
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LEON’S FURNITURE LTD. $12.53 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding:
72.3 million; Market cap: $905.9 million; Dividend yield: 3.2%) saw its sales fall 4.3% in the latest quarter, to $174.4 million from $182.1 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales. Earnings per share fell 4.0%, to $0.24 from $0.25.
Leon’s plans to speed up its expansion by opening roughly five new stores a year over the next five years. It is also renovating many of its existing stores.
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72.3 million; Market cap: $905.9 million; Dividend yield: 3.2%) saw its sales fall 4.3% in the latest quarter, to $174.4 million from $182.1 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales. Earnings per share fell 4.0%, to $0.24 from $0.25.
Leon’s plans to speed up its expansion by opening roughly five new stores a year over the next five years. It is also renovating many of its existing stores.
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DOREL INDUSTRIES $24.54 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com;Shares outstanding: 32.6 million; Market cap: $800.0 million; Dividend yield: 2.4%) makes a wide range of products, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; home furnishings, and recreational products, including bicycles. It has 4,700 employees and plants in 19 countries.
In the three months ended September 30, 2011, Dorel’s sales rose 1.1%, to $575.8 million from $569.5 million a year earlier (all figures except share price in U.S. dollars). The recreational/leisure division’s sales rose 21.6%, mainly on strong demand for bicycles. That offset lower sales at the other divisions.
Still, earnings per share fell 24.7%, to $0.71 from $0.93 a year earlier, mostly due to rising shipping and raw-material costs. The company didn’t pass on all of these price increases to its customers due to continuing economic weakness in the U.S. and Europe.
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In the three months ended September 30, 2011, Dorel’s sales rose 1.1%, to $575.8 million from $569.5 million a year earlier (all figures except share price in U.S. dollars). The recreational/leisure division’s sales rose 21.6%, mainly on strong demand for bicycles. That offset lower sales at the other divisions.
Still, earnings per share fell 24.7%, to $0.71 from $0.93 a year earlier, mostly due to rising shipping and raw-material costs. The company didn’t pass on all of these price increases to its customers due to continuing economic weakness in the U.S. and Europe.
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IMPERIAL METALS $12.30 (Toronto symbol III; TSINetwork Rating: Speculative) (604-669-8959; www.imperialmetals.com; Shares outstanding: 74.9 million; Market cap: $921.3 million) has split its shares on a two-for-one basis. That should make the shares more liquid and help the company attract more investors.
Meanwhile, Imperial’s cash flow per share rose 17.8% in the nine months ended September 30, 2011, to $0.86 from $0.73 (adjusted for the two-for-one split).
The company aims to use the cash flow from its Mount Polley and Huckleberry mines in B.C. to build a mine at its Red Chris copper/gold property in northwestern B.C.
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Meanwhile, Imperial’s cash flow per share rose 17.8% in the nine months ended September 30, 2011, to $0.86 from $0.73 (adjusted for the two-for-one split).
The company aims to use the cash flow from its Mount Polley and Huckleberry mines in B.C. to build a mine at its Red Chris copper/gold property in northwestern B.C.
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ZARGON OIL & GAS $12.58 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 29.2 million; Market cap: $367.3 million; Dividend yield: 9.5%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. Its production is 60% oil and 40% gas.
In the three months ended September 30, 2011, Zargon produced 9,014 barrels of oil equivalent per day. That’s down 10.7% from 10,094 barrels a year earlier. The company sold some less-important properties; that was the main reason for the drop. The lower production pushed down Zargon’s cash flow per share by 27.5%, to $0.50 from $0.69 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. Horizontal drilling works well in places where conventional drilling is impossible or too expensive.
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In the three months ended September 30, 2011, Zargon produced 9,014 barrels of oil equivalent per day. That’s down 10.7% from 10,094 barrels a year earlier. The company sold some less-important properties; that was the main reason for the drop. The lower production pushed down Zargon’s cash flow per share by 27.5%, to $0.50 from $0.69 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. Horizontal drilling works well in places where conventional drilling is impossible or too expensive.
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BIRCHCLIFF ENERGY $13.24 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 131.4 million; Market cap: $1.7 billion; No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 75% of Birchcliff’s production is natural gas. The remaining 25% is oil.
In the three months ended September 30, 2011, Birchcliff’s production jumped 34.6%, to 17,648 barrels of oil equivalent per day (including natural gas) from 13,109 barrels a year earlier.
Cash flow per share rose 50.0%, to $0.27 from $0.18. The production increase and higher oil prices were the main reasons for the gain.
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In the three months ended September 30, 2011, Birchcliff’s production jumped 34.6%, to 17,648 barrels of oil equivalent per day (including natural gas) from 13,109 barrels a year earlier.
Cash flow per share rose 50.0%, to $0.27 from $0.18. The production increase and higher oil prices were the main reasons for the gain.
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COMPUTER MODELLING GROUP $15.32 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403- 531-1300; www.cmgroup.com; Shares outstanding: 37.8 million; Market cap: $579.1 million; Dividend yield: 2.9%) reports that its revenue fell 10.1% in the three months ended September 30, 2011, to $12.0 million from $13.3 million a year earlier.
Licence revenue rose to $10.9 million from $10.8 million, but that was offset by a 57.0% drop in consulting and professional-services revenue, to $1.1 million from $2.5 million. The company consulted on a few large, one-time projects a year ago. Earnings per share fell 7.7%, to $0.12 from $0.13.
Already a leader in complex heavy-oil and oil-sands simulations, Computer Modelling should profit as oil and gas producers continue to develop other unconventional sources, such as shale gas.
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Licence revenue rose to $10.9 million from $10.8 million, but that was offset by a 57.0% drop in consulting and professional-services revenue, to $1.1 million from $2.5 million. The company consulted on a few large, one-time projects a year ago. Earnings per share fell 7.7%, to $0.12 from $0.13.
Already a leader in complex heavy-oil and oil-sands simulations, Computer Modelling should profit as oil and gas producers continue to develop other unconventional sources, such as shale gas.
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MAJOR DRILLING $15.32 (Toronto symbol MDI; TSINetwork Rating: Speculative) (www.majordrilling.com; 1-866-264-3986; Shares outstanding: 74.9 million; Market cap: $1.1 billion; Dividend yield: 1.0%) is a large contract drilling firm that mainly serves the mining industry.
In the three months ended October 31, 2011, Major’s revenue rose 67.3%, to $213.9 million from $127.8 million a year earlier. Earnings per share jumped 168.8%, to $0.43 from $0.16.
During the quarter, many of Major’s customers increased their drilling activity to take advantage of record gold prices and high base metal prices. Gold mining firms supply 48% of Major’s revenue, followed by base-metal and uranium miners (35%) and energy, coal and groundwater test drillers (17%).
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In the three months ended October 31, 2011, Major’s revenue rose 67.3%, to $213.9 million from $127.8 million a year earlier. Earnings per share jumped 168.8%, to $0.43 from $0.16.
During the quarter, many of Major’s customers increased their drilling activity to take advantage of record gold prices and high base metal prices. Gold mining firms supply 48% of Major’s revenue, followed by base-metal and uranium miners (35%) and energy, coal and groundwater test drillers (17%).
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PASON SYSTEMS $11.74 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.3 million; Market cap: $966.2 million; Dividend yield: 3.4%) 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 and Argentina.
In the three months ended September 30, 2011, Pason’s revenue rose 29.2%, to $88.7 million from $68.7 million a year earlier. Many of the company’s clients increased their drilling, especially for shale gas and oil.
Earnings jumped 140.0%, to $28.5 million, or $0.35 a share, from $11.9 million, or $0.15 a share. The increased drilling pushed up Pason’s earnings. Strong demand also let the company raise its prices.
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In the three months ended September 30, 2011, Pason’s revenue rose 29.2%, to $88.7 million from $68.7 million a year earlier. Many of the company’s clients increased their drilling, especially for shale gas and oil.
Earnings jumped 140.0%, to $28.5 million, or $0.35 a share, from $11.9 million, or $0.15 a share. The increased drilling pushed up Pason’s earnings. Strong demand also let the company raise its prices.
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AMERIGO RESOURCES $0.50 (Toronto symbol ARG; TSINetwork Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 172.3 million; Market cap: $86.2 million; No divd.) processes copper and molybdenum from the waste rock from Chile’s El Teniente, the world’s largest copper mine.
In the three months ended September 30, 2011, Amerigo’s cash flow was $0.03 a share, down from $0.06 a year earlier. However, that was the result of a strike that is now over.
Amerigo has just declared its semi-annual dividend of $0.02 a share. That gives the stock a high 8.0% yield. The dividend appears safe, but a prolonged period of low copper prices could lower the cash the company has available for dividend payments.
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In the three months ended September 30, 2011, Amerigo’s cash flow was $0.03 a share, down from $0.06 a year earlier. However, that was the result of a strike that is now over.
Amerigo has just declared its semi-annual dividend of $0.02 a share. That gives the stock a high 8.0% yield. The dividend appears safe, but a prolonged period of low copper prices could lower the cash the company has available for dividend payments.
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