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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MCDONALD’S CORP. $78 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.0 billion; Market cap: $78.0 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.mcdonalds.com) is the world’s largest fast-food restaurant chain by revenue. It has 32,800 restaurants that mainly serve hamburgers and french fries. Franchisees own 80% of these outlets. McDonald’s gets 65% of its sales from overseas. The company continues to profit from new menu items, such as breakfast oatmeal. As well, its premium coffees are helping it compete with Starbucks. In the quarter ended March 31, 2011, sales rose 8.9%, to $6.1 billion from $5.6 billion a year earlier. Overall same-store sales rose 3.6%. European same-store sales rose 4.9%, the U.S. rose 3.0% and the Asia-Pacific gained 0.5%. Earnings rose 10.9%, to $1.2 billion from $1.1 billion. Earnings per share rose 15.0%, to $1.15 from $1.00, on fewer shares outstanding....
QUAKER CHEMICAL CORP. $45 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 11.5 million; Market cap: $517.5 million; Price-to-sales ratio: 0.9; Dividend yield: 2.1%; TSINetwork Rating: Average; www.quakerchem.com) makes lubricants and chemicals that keep mechanical parts from corroding. In the three months ended March 31, 2011, Quaker’s earnings rose 12.5%, to $10.9 million from $9.4 million a year earlier. Earnings per share rose 8.3%, to $0.91 from $0.84, on more shares outstanding. Sales rose 24.6%, to $159.9 million from $128.3 million. The company needs oil to make its products, so it has raised its selling prices to offset rising oil costs. This was the main reason for the higher sales. Sales volumes also rose 16%, partly due to an acquisition. Even so, higher raw material costs cut Quaker’s gross margin (gross profits as a percentage of sales) to 33.0% from 36.9%....
If you subscribe to Wall Street Stock Forecaster, our newsletter that recommends U.S.A. stock market picks, you’ll want to take a very close look at the current issue. In it, we reveal the names of 6 stocks you should sell right away—and avoid the potential for big losses. This is crucial investment advice you simply can’t afford to miss. (Note: if you are a current Wall Street Stock Forecaster subscriber or Inner Circle member, click here to view the latest issue, which contains these 6 sell recommendations. Be sure to log in first.)...
TENNANT CORP. $41 (New York symbol TNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 19.1 million; Market cap: $783.1 million; Price-to-sales ratio: 1.1; Dividend yield: 1.7%; TSINetwork Rating: Average; www.tennantco.com) makes industrial floor-cleaning equipment, including scrubbers, sweepers and polishers. It also makes cleaning equipment for garages, stadiums, parking lots and city streets. Tennant’s clients are mainly businesses and municipal governments. Tennant continues to see strong demand for its “ec-H2O” floor-scrubbing machine, which uses electricity to make tap water act like a detergent. That eliminates the need for soaps and cleaning agents, and lowers the machine’s operating costs. Strong demand for the ec-H2O is the main reason why Tennant earned $5.9 million, or $0.30 a share, in the three months ended March 31, 2011. That’s up 43.4% from $4.1 million, or $0.21 a share, a year earlier. Sales rose 15.0%, to $172.6 million from $150.1 million....
BRIGGS & STRATTON CORP. $23 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 50.3 million; Market cap: $1.2 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is the world’s largest lawnmower engine maker. This business accounts for 62% of Briggs’sales. It gets the remaining 38% of its sales by making other home and garden equipment, such as generators, pressure washers and snow blowers. The weak U.S. economy has weighed on Briggs’ sales. In response, the company recently closed a plant in Wisconsin. Due to $4.6 million in restructuring and refinancing charges, Briggs lost $1.3 million, or $0.03 a share, in its second quarter, which ended December 26, 2010. A year earlier, it earned $3.0 million, or $0.06 a share. Sales rose 14.6%, to $450.3 million from $393.0 million. The company sold more engines to European and Asian manufacturers. It also sold more snow blowers, lawn mowers and pressure washers....
INTERNATIONAL FLAVORS & FRAGRANCES INC. $63 (New York symbol IFF; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 80.3 million; Market cap: $5.1 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.iff.com) makes over 34,000 unique compounds that improve the taste of foods and the smell of a wide variety of consumer products. It has 31 plants in 14 countries. Major clients include Procter & Gamble, Nestle, Kraft, Unilever and General Mills. In 2010, the company’s Fragrances business accounted for 54% of its sales, and 49% of its earnings. These products are found in such items soaps, detergents and air fresheners. The remaining 46% of IFF’s sales and 51% of its earnings came from its Flavors division. These products are used in soft drinks, candies, baked goods and alcoholic drinks....
Apple Inc., symbol AAPL on Nasdaq, makes computers and a variety of other electronic devices. Portable devices, such as the iPod music player, the iPhone smartphone and the iPad tablet computer, dominate Apple’s overall sales. Users of these products also buy music, movie and video-game downloads at the tech stock’s iTunes online store. In its second quarter, which ended March 26, 2011, Apple’s earnings rose 94.8%, to $6.0 billion, or $6.40 a share. That easily beat the consensus estimate of $5.38 a share. The company earned $3.1 billion, or $3.33 a share, a year earlier. The tech stock’s sales jumped 82.7%, to $24.7 billion from $13.5 billion. Sales outside the U.S. accounted for 59% of the total. During the quarter, the company sold 18.6 million iPhone smartphones (up 113.1%) and 3.8 million Mac computers (up 27.8%). Sales of the tech stocks iPod music players fell 17.2%, to 9.0 million units. However, that’s because many iPod users are upgrading to the iPhone, which also plays music and videos....
In the April 21, 2011, Successful Investor Email/Telephone Hotline, we’ve updated our buy/sell/hold advice on grocery retailer Metro Inc. (symbol MRU.A on Toronto).
Inside this growth stock’s evolution from an aggressive to a conservative pick
Metro is a good example of a stock that has graduated from Stock Pickers Digest, our newsletter for aggressive investors, to The Successful Investor, which focuses on more conservative selections....
Supervalu Inc., New York symbol SVU operates 2,394 company-owned and franchised supermarkets. The Wall Street stock’s major banners include Save-A-Lot, Albertsons and Jewel-Osco. Supervalu gets 77% of its revenue from its retail stores. It gets the remaining 23% by supplying food to 1,900 independent grocery stores. The company continues to focus on its core business of food retailing, and has stopped selling other items, such as automotive goods and perfumes, in its stores. In its fiscal 2011 ended February 26, 2011, the Wall Street stock’s sales fell 7.5%, to $37.5 billion from $40.6 billion in fiscal 2010. Same-store sales fell 6.0%. The company closed underperforming stores, and was forced to cut its prices due to stronger competition from discount retailers, including Wal-Mart, which is selling more groceries in its stores....
If you subscribe to Stock Pickers Digest, our newsletter that recommends stocks for your aggressive portfolio, you’ll want to take a very close look at the current issue. In it, we reveal the names of 12 stocks you should sell right away—and avoid the potential for big losses. (Note: if you are a current Stock Pickers Digest subscriber or Inner Circle member, click here to view the latest issue, which contains these 12 sell recommendations. Be sure to log in first.) If you’re a long-time subscriber to one or more of our newsletters, you likely know that we downplay market-timing and stock-price predictions in the advice we give you. Instead, we focus on investment quality. This includes the stocks for your aggressive portfolio that we recommend in Stock Pickers Digest....