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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ALIMENTATION COUCHE-TARD $30.76 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 242.4 million; Market cap: $7.5 billion; Dividend yield: 1.0%) is the largest convenience-store operator in Canada, with over 2,000 outlets. It also has over 3,900 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. Couche-Tard sells fuel at over 68% of its stores.
In the quarter ended October 9, 2011, Couche-Tard’s earnings per share rose 6.9%, to $0.62 from $0.58 a year earlier (all figures except share price and market cap in U.S. dollars).
Sales rose 24.1%, to $5.2 billion from $4.1 billion. The gains came from higher fuel prices, the stronger Canadian dollar and higher merchandise sales. The company gets 30% of its sales by selling merchandise.
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In the quarter ended October 9, 2011, Couche-Tard’s earnings per share rose 6.9%, to $0.62 from $0.58 a year earlier (all figures except share price and market cap in U.S. dollars).
Sales rose 24.1%, to $5.2 billion from $4.1 billion. The gains came from higher fuel prices, the stronger Canadian dollar and higher merchandise sales. The company gets 30% of its sales by selling merchandise.
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Cedar Fair L.P., symbol FUN on New York, owns and operates 11 amusement parks including Knott’s Berry Farm in California and Canada’s Wonderland, six outdoor water parks, one indoor water park and five hotels. For 2010, the U.S. stock’s revenue jumped 6.7%, to $977.6 million from $916.1 million in 2009. Park attendance rose 7.8%, and revenue from the company’s hotels rose 6.1%. Per-guest spending slipped less than 1% despite higher sales of season passes, which typically decrease the amount spent per visit. Even so, the partnership lost $31.6 million, or $0.57 a unit, in 2010, compared to earnings of $35.4 million, or $0.63 a unit, in 2009....
Tim Hortons, symbol THI on Toronto symbol THI, sold its half of Maidstone Bakeries business to Aryzta AG of Switzerland last year for $475 million. That helped the company buy back $341.1 million of its stock under its current repurchase program, which ended February 17, 2011. Under its new program, the company plans to spend up to $445 million on share repurchases over the next year. Meanwhile, the growth stock pick’s sales rose 4.0%, to $2.5 billion in 2010 from $2.4 billion in 2009. During the year, the company opened 149 new restaurants in Canada. That brings its total number of Canadian stores up to 3,148. Same-stores sales in Canada rose 4.9%. In the U.S., Tim Hortons opened 44 restaurants and 52 self-serve kiosks. It now has 602 U.S. outlets. Same-store sales in the U.S. rose 3.9%. The company’s earnings for 2010 jumped 110.5%, to $624.0 million from $296.4 million in 2009. Earnings per share rose 118.3%, to $3.58 from $1.64, on fewer shares outstanding. This was mostly due to a $361.1-million gain on the sale of Maidstone. New restaurants and menu items also contributed to the higher earnings....
APACHE CORP. $121 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 364.6 million; Market cap: $44.1 billion; Price-to-sales ratio: 3.6; Dividend yield: 0.5%; TSINetwork Rating: Average; www.apachecorp.com) gets 20% of its oil and natural gas from Egypt....
Wyndham Worldwide, symbol WYN on New York, is the third-largest hotel company in the world, with 7,110 franchised hotels. It operates under a number of brands, including Wyndham Hotels and Resorts, Ramada, Days Inn, Super 8, Wingate by Wyndham, Baymont Inn & Suites, Microtel Inns & Suites, Hawthorn Suites, Howard Johnson, Travelodge, Knights Inn and Ameri-host Inn. We analyze Wyndham in Stock Pickers Digest, our newsletter for investing in your aggressive portfolio. In addition to hotels, Wyndham manages a number of vacation resorts, rental properties, luxury clubs and time-shares. This wide range of operations gives Wyndham more consistent cash flow than most of its competitors, who mainly focus on hotels....
NEWELL RUBBERMAID INC. $20 (New York symbol NWL; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 290.3 million; Market cap: $5.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.0%; TSINetwork Rating: Average; www.newellrubbermaid.com) makes plastic storage bins, tools, window blinds, pens and a number of other household items. Its top brands include Rubbermaid, Sharpie, Paper Mate, Parker, Graco, Waterman and Levolor. The company has three divisions: Home & Family, which supplied 41% of its 2010 sales and 35% of its earnings; Office Products (30%, 34%) and Tools, Hardware and Commercial Products (29%, 31%). Newell recently finished a multi-year restructuring, which included closing plants and getting out of lessprofitable businesses. These moves will cut its yearly costs by $220 million by the end of 2011....
CHEVRON CORP. $102 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.0 billion; Market cap: $204.0 billion; Price-to-sales ratio: 1.0; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.chevron.com) began exploring for oil in Libya in 2005, after the U.S....
SHERWIN-WILLIAMS CO. $83 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 107.9 million; Market cap: $9.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.sherwin-williams.com) is North America’s largest paint producer. The company also operates 3,400 paint stores, which account for 55% of its sales. In 2010, Sherwin expanded its wood-coating operations by purchasing two European companies: In April, it paid $53.8 million for Italy’s Sayerlack. In September, it bought Sweden’s Becker Acroma for $230.4 million. These new businesses are part of the reason why Sherwin’s sales rose 9.6% in 2010, to $7.8 billion from $7.1 billion in 2009. However, integration costs will keep them from contributing to Sherwin’s earnings until mid-2011....
PROCTER & GAMBLE CO. $64 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.8 billion; Market cap: $179.2 billion; Price-to-sales ratio: 2.3; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pg.com) is one of the world’s largest makers of household and personal-care products. Some of its top brands are Tide detergent, Crest toothpaste, Head & Shoulders shampoo and Pampers diapers. The company gets 60% of its sales from outside the U.S. Procter is streamlining its business. That includes dropping some less-profitable brands and cutting a third of its suppliers. These moves should free up more cash for advertising and marketing. As well, lower costs will give Procter more flexibility to cut its prices without hurting its profit margins. Meanwhile, the company earned $3.3 billion in its 2011 second quarter, which ended December 31, 2010. That’s up 5.8% from $3.1 billion a year earlier. Earnings per share rose 9.9%, to $1.11 from $1.01, on fewer shares outstanding. If you exclude an unusual tax gain and costs related to an investigation of the company by European competition regulators, earnings per share would have risen 2.7%, to $1.13 from $1.10....
Nvidia Corp., Nasdaq symbol NVDA, designs graphic chips that make computer games run more smoothly and appear more lifelike. In its 2011 fiscal year, which ended January 30, 2011, Nvidia earned $253.1 million. It lost $68.0 million in 2010. Earnings per share jumped to $0.43 from a loss of $0.12. Excluding one-time items, the technology stock’s earnings per share rose 160.0%, to $0.65 from $0.45. Nvidia spent 24.0% of its sales on research in fiscal 2011, so it’s more profitable than it seems. Sales rose 6.5%, to $3.5 billion from $3.3 billion. That’s largely due to strong demand for the technology stock’s new Tegra chips, which greatly enhance displays on cellphones and other mobile devices. The company is also seeing strong interest from computer makers for its chips that can process data as well as display graphics....