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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REITMANS (CANADA) LTD. $14.25 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384-1140; www.reitmans.com; Shares outstanding: 66.3 million; Market cap: $944.8 million; Dividend yield: 5.6%) owns 975 women’s clothing stores across Canada.
The chain consists of 366 Reitmans, 158 Penningtons, 158 Smart Set, 123 Addition Elle, 77 Thyme Maternity, 68 RW & Co. and 25 Cassis stores. Reitmans is in the process of closing the Cassis stores and converting them to its other chains.
In the three months ended October 29, 2011, Reitmans’ earnings fell 49.0%, to $10.6 million, or $0.16 a share, from $20.7 million, or $0.31 a share, a year earlier. The company’s sales were down 3.2%, to $254.1 million from $262.5 million. Same-store sales declined 5.8%.
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The chain consists of 366 Reitmans, 158 Penningtons, 158 Smart Set, 123 Addition Elle, 77 Thyme Maternity, 68 RW & Co. and 25 Cassis stores. Reitmans is in the process of closing the Cassis stores and converting them to its other chains.
In the three months ended October 29, 2011, Reitmans’ earnings fell 49.0%, to $10.6 million, or $0.16 a share, from $20.7 million, or $0.31 a share, a year earlier. The company’s sales were down 3.2%, to $254.1 million from $262.5 million. Same-store sales declined 5.8%.
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CHESAPEAKE ENERGY $21.45 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 753.0 million; Market cap: $16.2 billion; Dividend yield: 1.6%) is forming a second joint venture with major French oil firm Total S.A.
In early 2010, Chesapeake sold a share of its Barnett Shale acreage in Texas to Total for $2.25 billion. Shale oil and shale gas are trapped in rock formations. To extract them, companies must pump water and chemicals into the rock. This fractures the rock and releases the oil or gas.
Under this new deal, Total will buy a 25% stake in roughly 619,000 exploration acres in the Utica Shale area of Ohio. Total will pay Chesapeake $610 million for its share of the acreage, plus $1.42 billion in development costs. Chesapeake expects to receive the full amount by the end of 2014.
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In early 2010, Chesapeake sold a share of its Barnett Shale acreage in Texas to Total for $2.25 billion. Shale oil and shale gas are trapped in rock formations. To extract them, companies must pump water and chemicals into the rock. This fractures the rock and releases the oil or gas.
Under this new deal, Total will buy a 25% stake in roughly 619,000 exploration acres in the Utica Shale area of Ohio. Total will pay Chesapeake $610 million for its share of the acreage, plus $1.42 billion in development costs. Chesapeake expects to receive the full amount by the end of 2014.
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CAMECO CORP. $22.90 (Toronto symbol CCO; TSINetwork Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 390.0 million; Market cap: $8.9 billion; Dividend yield 0.7%) is the world’s largest uranium producer. It supplies over 18% of global production, and has large, high-grade reserves, low-cost operations, significant market share and a number of uranium mines.
Cameco also holds a 31.6% stake in Ontario’s Bruce Power partnership, which operates four of the eight reactors at the Bruce plant, North America’s largest nuclear power complex.
In the three months ended September 30, 2011, Cameco’s revenue rose 25.8%, to $527 million from $419 million a year earlier. It sold more uranium in the latest quarter, and its selling prices also rose. Earnings per share jumped 30.0%, to $0.26 from $0.20.
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Cameco also holds a 31.6% stake in Ontario’s Bruce Power partnership, which operates four of the eight reactors at the Bruce plant, North America’s largest nuclear power complex.
In the three months ended September 30, 2011, Cameco’s revenue rose 25.8%, to $527 million from $419 million a year earlier. It sold more uranium in the latest quarter, and its selling prices also rose. Earnings per share jumped 30.0%, to $0.26 from $0.20.
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SHERRITT INTERNATIONAL $6.36 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.4 million; Market cap: $1.9 billion; Dividend yield: 2.4%) is a diversified natural-resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 376 megawatts of power-generation capacity in Cuba.
Sherritt is a major nickel producer, with operations in Cuba and Canada. It is also close to finishing a mine at its 40%-owned Ambatovy project on the island nation of Madagascar, off Africa’s east coast. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. It is also Canada’s largest thermal coal producer.
In the three months ended September 30, 2011, Sherritt’s earnings jumped 102.2%, to $45.5 million, or $0.15 a share. A year earlier, it earned $22.5 million, or $0.07 a share. Revenue rose 13.0%, to $466.4 million from $412.7 million. Higher coal and oil prices were the main reasons for the improved results.
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Sherritt is a major nickel producer, with operations in Cuba and Canada. It is also close to finishing a mine at its 40%-owned Ambatovy project on the island nation of Madagascar, off Africa’s east coast. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. It is also Canada’s largest thermal coal producer.
In the three months ended September 30, 2011, Sherritt’s earnings jumped 102.2%, to $45.5 million, or $0.15 a share. A year earlier, it earned $22.5 million, or $0.07 a share. Revenue rose 13.0%, to $466.4 million from $412.7 million. Higher coal and oil prices were the main reasons for the improved results.
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AASTRA TECHNOLOGIES $15.82 (Toronto symbol AAH; TSINetwork Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 14.1 million; Market cap: $223.1 million; Dividend yield: 5.1%) sells products and systems that let businesses access communication networks, including the Internet.
In the three months ended September 30, 2011, Aastra’s sales fell 2.6%, to $156.6 million from $160.7 million a year earlier. Higher sales in Germany were offset by lower sales in Spain and North America.
The company earned $0.12 a share, up sharply from $0.01 a share, mainly on lower research costs and foreign-exchange losses. Aastra holds cash of $118.5 million, or a high $8.34 a share, and has no long-term debt.
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In the three months ended September 30, 2011, Aastra’s sales fell 2.6%, to $156.6 million from $160.7 million a year earlier. Higher sales in Germany were offset by lower sales in Spain and North America.
The company earned $0.12 a share, up sharply from $0.01 a share, mainly on lower research costs and foreign-exchange losses. Aastra holds cash of $118.5 million, or a high $8.34 a share, and has no long-term debt.
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ACI WORLDWIDE $29.96 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 34.3 million; Market cap: $1.0 billion; No dividends paid) makes software that is used to process transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments.
ACI recently bought S1 Corp. for $540 million in cash and stock. This acquisition looks like a good fit: S1 sells transaction software for banks, credit unions, retailers and other processors. It has over 3,000 clients worldwide.
In the three months ended September 30, 2011, ACI’s revenue rose 15.6%, to $112.1 million from $97.0 million a year earlier. Earnings rose sharply, to $10.5 million, or $0.31 a share, from $2.3 million, or $0.07 a share. The company holds cash of $170.8 million, or $4.98 a share.
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ACI recently bought S1 Corp. for $540 million in cash and stock. This acquisition looks like a good fit: S1 sells transaction software for banks, credit unions, retailers and other processors. It has over 3,000 clients worldwide.
In the three months ended September 30, 2011, ACI’s revenue rose 15.6%, to $112.1 million from $97.0 million a year earlier. Earnings rose sharply, to $10.5 million, or $0.31 a share, from $2.3 million, or $0.07 a share. The company holds cash of $170.8 million, or $4.98 a share.
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SYMANTEC CORP. $16.55 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 751.0 million; Market cap: $12.4 billion; No dividends paid) makes computer-security software, including the popular Norton antivirus program. It also sells products and services for email filtering, data backup and other business-related uses. In addition, Symantec offers data-archiving software that helps its clients meet increasingly strict regulatory and compliance standards.
In the three months ended September 30, 2011, Symantec’s earnings rose 33.8%, to $182 million from $136 million a year earlier. Earnings per share jumped 41.2%, to $0.24 from $0.17, on fewer shares outstanding. If you exclude unusual items, mainly asset writedowns and restructuring costs, earnings per share would have risen 14.7%, to $0.39 from $0.34. That matched the consensus earnings estimate.
Sales rose 13.6%, to $1.7 billion from $1.5 billion. The company gets 52% of its sales from overseas. If you disregard the positive impact of exchange rates, sales would have risen 9% in the latest quarter.
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In the three months ended September 30, 2011, Symantec’s earnings rose 33.8%, to $182 million from $136 million a year earlier. Earnings per share jumped 41.2%, to $0.24 from $0.17, on fewer shares outstanding. If you exclude unusual items, mainly asset writedowns and restructuring costs, earnings per share would have risen 14.7%, to $0.39 from $0.34. That matched the consensus earnings estimate.
Sales rose 13.6%, to $1.7 billion from $1.5 billion. The company gets 52% of its sales from overseas. If you disregard the positive impact of exchange rates, sales would have risen 9% in the latest quarter.
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WESTJET AIRLINES $11.55 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com;
Shares outstanding: 139.4 million; Market cap: $1.6 billion; Dividend yield: 1.7%) was our “#1 Stock of the Year” for 2010 and 2011.
WestJet’s revenue rose 3.3% in the three months ended September 30, 2011, to $775.3 million from $684.1 million a year earlier. Demand for the company’s flights remained strong.
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Shares outstanding: 139.4 million; Market cap: $1.6 billion; Dividend yield: 1.7%) was our “#1 Stock of the Year” for 2010 and 2011.
WestJet’s revenue rose 3.3% in the three months ended September 30, 2011, to $775.3 million from $684.1 million a year earlier. Demand for the company’s flights remained strong.
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ALIMENTATION COUCHE-TARD $30.55 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard.com; Shares outstanding: 179.4 million; Market cap: $5.5 billion; Yield: 1.0%) is the largest convenience-store operator in Canada, with 2,000 outlets. It also has over 3,700 U.S. stores. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. The company sells fuel at 72% of its stores.
Couche-Tard’s revenue continues to rise rapidly. Revenue jumped 86.7% between 2006 and 2010, to $19.0 billion from $10.2 billion (all figures except share price and market cap in U.S. dollars). Much of the rise comes from a steady stream of acquisitions. But the company was also able to boost profits with those acquisitions. Earnings per share jumped 106.2% over the same five years, to $2.00 from $0.97. Revenue will likely reach almost $24 billion this year.
Couche-Tard’s earnings per share rose 6.9% in the three months ended October 9, 2011, to $0.62 from $0.58. Sales rose 24.1% to $5.2 billion from $4.1 billion. The gains came from a rise in fuel prices, the stronger Canadian dollar and higher merchandise sales.
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Couche-Tard’s revenue continues to rise rapidly. Revenue jumped 86.7% between 2006 and 2010, to $19.0 billion from $10.2 billion (all figures except share price and market cap in U.S. dollars). Much of the rise comes from a steady stream of acquisitions. But the company was also able to boost profits with those acquisitions. Earnings per share jumped 106.2% over the same five years, to $2.00 from $0.97. Revenue will likely reach almost $24 billion this year.
Couche-Tard’s earnings per share rose 6.9% in the three months ended October 9, 2011, to $0.62 from $0.58. Sales rose 24.1% to $5.2 billion from $4.1 billion. The gains came from a rise in fuel prices, the stronger Canadian dollar and higher merchandise sales.
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Pat McKeough responds to many personal questions on specific stocks and other investing topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions. This week, one Inner Circle member asked for an assessment of a company that at times has been one of Canada’s most impressive growth stocks, but has also seen some sharp declines in its shares, as it did in December. Q: Pat: I currently hold a significant portfolio position of Gildan Activewear. At current levels, does Gildan look attractive? Any views? Thanks in advance....