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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Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Some of today’s best investments are in high tech. So are some of the worst.” Today’s fast-changing technology offers huge opportunities in technology stocks. However, fast change also brings danger....
Many Canadian firms have tried to expand into the U.S. over the years. Some, like Royal Bank of Canada (symbol RY on Toronto) have had difficulty in the United States. Other companies’ expansion efforts have failed miserably. Canadian Tire (symbol CTC.A on Toronto) provides a memorable example of a failed U.S. expansion. In 1982, the retailer bought a chain of Whites automotive-retail stores in Texas. By 1985, Canadian Tire had lost $300 million on this purchase. That’s when the company decided to sell the division and retreat to Canada. Its stock price has since gone up more than 360%. Canadian Tire is one of the stocks we cover in our Successful Investor newsletter.
This growth stock pick’s U.S. strategy builds on its Canadian roots
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The U.S. restaurant industry is highly competitive. Restaurant operators range from large chains, like McDonald’s and Burger King, to independent businesses and smaller chains, like Ruby Tuesday (symbol RT on New York). We cover Ruby Tuesday in Stock Pickers Digest, our newsletter for aggressive investing. (Ruby Tuesday has shot up 42% for us in the past year, and a continued economic rebound could help push this hot stock pick’s share price even higher. See below for more on the company’s future prospects.) Overall, the U.S. restaurant industry has faced tough challenges in the past two years. That’s because the economic downturn has prompted more consumers to eat at home, or to spend less when they dine out....
Hidden value is one of the key factors we look for when we choose stocks to recommend in our newsletters and investment services, including Wall Street Stock Forecaster, our advisory that covers the U.S. stock markets. (In a recent Wall Street Stock Forecaster hotline, we updated our buy/sell/hold advice on a technology stock that uses one of our favourite hidden assets to maximum effect. Read on for further details.) By hidden value, we mean valuable assets that are not getting the attention they deserve from investors. When a company’s assets are wholly or partially hidden, the stock trades for less than it’s really worth, so you get to buy at a bargain price....
The Canadian consumer sector is highly competitive. Aside from other domestic retailers, Canadian retailers face rising competition from large U.S. discount retailers, like Wal-Mart and Costco. As well, consumer stocks are more exposed to swings in the overall economy than companies in some other sectors, such as utilities. That’s especially true when you indulge in aggressive investing in consumer stocks and buy small retailers. They tend to be less well-established than larger companies, such as Canadian Tire. However, aggressive investing in consumer stocks also holds the potential for spectacular gains. (In a just-published issue of Stock Pickers Digest, our newsletter for aggressive investing, we update our buy/sell/hold advice on a retailer that has risen 36% for us in the past year — and could go even higher. Read on for further details.)...
Wind power stocks continue to attract a lot of investor attention. That’s because these companies build or operate wind turbines, which offer a source of clean, endlessly renewable energy that could replace fossil fuels like oil, coal and natural gas. However, like many other alternative-energy firms, wind power stocks face significant costs and risks. For example, varying wind speeds cause a wind turbine’s electricity output to fluctuate. In many areas, the wind is stronger in the daytime, when demand is lower, and dies down in the evening, when consumers use more appliances. As well, electrical power can’t be stored efficiently, so to make economic sense it must be used when it is produced. As a result, utilities must maintain back-up power capacity that is equal to their reliance on wind power....
On July 7, 2010, Agricultural Bank of China (AgBank) priced its first public share issue. The bank, which operates nearly 24,000 branches, will sell 25 billion shares on the Hong Kong Stock Exchange for HK$3.20 ($0.41 U.S.), and 22 billion shares on the Shanghai exchange for 2.68 yuan ($0.40 U.S.). Strong investor interest in China, whose economy grew 11.9% in the first quarter of 2010 compared to a year earlier, should help AgBank’s initial public offering (IPO) raise $22.1 billion U.S. That would make it the largest IPO in world stock market history, topping Industrial & Commercial Bank of China, which raised $21.6 billion U.S. in 2006. AgBank is the latest in a series of big world stock market IPOs from Asian and emerging markets this year. The world’s 10 biggest IPOs in 2010 include firms from China, Russia, Poland and India. The U.S. is noticeably absent from the list, and only one western European firm (from Spain) was included....
When you join Pat McKeough’s Inner Circle, you get to address investment questions directly to me and my research associates; AND you get to see all other members’ questions, and our answers (of course, we eliminate any personal information). Plus, you get all 4 of my investment advisories, including Wall Street Stock Forecaster, our newsletter that covers the U.S. markets. (See below for more on one of the global stock market investments we cover in Wall Street Stock Forecaster. The stock has risen over 57% in the past year — and we think it could go even higher.) So you can get a sense of how the service works, I’d like to share a recent question from an investor who is interested in global stock market investing through American Depositary Receipts (ADRs)....
KRAFT FOODS INC. $30 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.7 billion; Market cap: $51.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.9%; WSSF Rating: Above Average) is the world’s second-largest food company, after Swiss-based Nestle. Kraft has 11 brands that each generate over $1 billion in yearly sales. Aside from Kraft (cheeses, pasta and salad dressings), these brands include Philadelphia (cream cheese), Maxwell House (coffee), Nabisco (biscuits), Oreo (cookies), Trident (gum) and Oscar Meyer (meats). Wal-Mart, the company’s biggest customer, accounted for 16% of its 2009 sales. In February 2010, Kraft bought 71.7% of U.K.-based Cadbury plc, and acquired the remainder in April 2010. Cadbury is a leading maker of confectioneries, including chocolate, candy and gum....
APACHE CORP. $92 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 337.3 million; Market cap: $31.0 billion; Price-to-sales ratio: 3.3: Dividend yield: 0.7%; WSSF Rating: Average) produces oil and natural gas from properties in the U.S., Canada, the U.K., Australia, Egypt and Argentina. It gets roughly 50% of its production from oil, and 50% from natural gas. The company recently paid $2.7 billion in cash and stock for Mariner Energy Inc., which produces oil and natural gas in the Gulf of Mexico and at onshore properties in Texas and New Mexico. Apache also bought Devon Energy Corp.’s (New York symbol DVN) oil and gas reserves on the Gulf of Mexico Shelf for $1.05 billion. The Gulf of Mexico now accounts for 26% of Apache’s production. Offshore drilling is riskier than onshore operations, but Apache has a long history of success in this region. As well, most of Apache’s projects are in shallow water, which is less risky than deepwater projects like the BP well....