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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H&R Block, symbol HRB on New York, is the world’s largest provider of income-tax-preparation services. The company is one of the investments we analyze in Wall Street Stock Forecaster, our newsletter for U.S.A. stock market investing. In its 2011 fiscal year, which ended April 30, 2011, H&R Block’s U.S. offices prepared 14.8 million tax returns, up 3.6% from fiscal 2010. The number of returns processed over the Internet jumped 28.7%....
Adobe Systems Inc., Nasdaq symbol ADBE, makes software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use the tech stock’s software to create print publications and web pages. The company also makes Adobe Flash, which lets web site developers make web pages more interactive by adding animation and video. The company reports that its earnings jumped 54.4% in its 2011 second quarter, which ended June 3, 3011, to $229.4 million from $148.6 million a year earlier. The tech stock’s earnings per share rose 60.7%, to $0.45 from $0.28, on fewer shares outstanding. If you exclude one-time items, such as restructuring charges and investment losses, the tech stock’s earnings per share would have risen 25.0%, to $0.55 from $0.44. On this basis, the latest earnings beat the consensus estimate of $0.51 a share....
Leon’s Furniture Ltd., symbol LNF on Toronto, has built its chain of over 69 furniture stores in Canada on its four main strengths: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; strong after-sales service; and aggressive TV, radio and print advertising. We analyze Leon’s in Stock Pickers Digest, our newsletter that recommends stocks that may be appropriate for your aggressive portfolio. In the three months ended March 31, 2011, Leon’s sales fell 6.0 %, to $191.6 million from $203.8 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales. The aggressive portfolio stock’s earnings fell 14.0%, to $9.8 million, or $0.14 a share, from $11.4 million, or $0.16 a share. The slower sales were the main reason for the earnings decline. The company also spent more on advertising....
U.S. restaurants are always looking for ways to give themselves an edge in their intensely competitive industry. Some, like Yum! Brands (a stock we analyze in our Wall Street Stock Forecaster newsletter), are focusing on expanding in fast-growing overseas markets, like India and China. (Yum, whose restaurant chains include KFC, Pizza Hut and Taco Bell, was the first fast-food company to enter China, in 1987). Other U.S. restaurants have been looking to attract more diners by launching innovative new menu items, renovating restaurants, and improving their service....
H.J. Heinz Co., New York symbol HNZ, makes a wide variety of processed foods, including condiments, sauces, soups, baked beans, pastas and infant food. Its flagship product is Heinz Ketchup. We analyze Heinz in Wall Street Stock Forecaster, our newsletter for U.S.A. stock market investing. In its latest fiscal year, which ended April 27, 2011, Heinz earned $989.5 million. That’s up 8.2% from $914.5 million in the prior year....
Growth stocks are companies whose earnings growth has been above the market average, and is likely to remain above average. These firms often pay little or no dividends.
Ameren Corp., symbol AEE on New York, sells electricity and natural gas to 3.4 million customers in Illinois and Missouri. In the three months ended March 31, 2011, the Wall Street stock’s earnings fell 36.8%, to $60.0 million, or $0.25 a share, from $95.0 million, or $0.40 a share, a year earlier. These figures exclude unusual items, mainly gains and losses on hedging contracts that the company uses to lock in its fuel prices. The lower earnings were mainly due to lower prices for electricity and natural gas. Higher fuel and transportation costs, plus higher income taxes in Illinois, also hurt its earnings. Moreover, severe storms added to the company’s costs, and cut electricity sales during widespread power outages....
Today’s popular investment themes include green energy stocks, such as solar, wind, and geothermal, and emerging markets, such as China and India.
Agilent Technologies Inc., symbol A on New York, makes testing systems that improve electronic products, such as cellphones and networking equipment. In May 2010, Agilent bought Varian Inc. for $1.5 billion. Varian makes a wide range of medical and drug-testing equipment, such as mass spectrometers that detect and measure substances in the blood and other samples. Medical-equipment demand is less cyclical than testing products, so this move cuts the tech stock’s risk. Thanks to Varian, Agilent earned $200.0 million, or $0.56 a share, in the three months ended April 30, 2011. That’s up 85.2% from $108.0 million, or $0.31 a share, a year earlier. These figures include restructuring costs and expenses related to integrating Varian. The tech stock’s revenue jumped 31.9%, to $1.7 billion from $1.3 billion. The company spends around 10% of its revenue on research and development....
High-quality foreign stocks are a great way to diversify your portfolio. Moreover, many fast-growing markets, like China and India, have positive outlooks. That’s because their people are generally younger than North Americans, and rising incomes are helping more of them advance into the middle class. Even so, investing in India and other overseas markets remains riskier than investing in North America. That’s because many emerging countries have language barriers, weak investor-protection laws, less commitment to openness, fairness and so on.