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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Demand for medical devices and supplies will undoubtedly continue to grow as the population ages. Companies in this fast-changing field make a wide range of products, from laboratory instruments to bandages and surgical tools. Some medical-equipment firms are large and well-established, like C.R. Bard (symbol BCR on New York), one of the stocks we cover in our Wall Street Stock Forecaster newsletter. Bard makes many different medical devices and tools, and has over $2.4 billion U.S. in annual sales. The company also has a long history of paying dividends. At the other end of the scale are companies like Intuitive Surgical (symbol ISRG on Nasdaq). Intuitive’s share price has been rapidly rising, but its sales of $874.9 million U.S. are only about 36% of Bard’s sales. As well, Intuitive only has one product — the da Vinci computerized surgical system (more on that below) — and does not pay a dividend....
Technology has made extraordinary advances in the past decade, yet lots of investors lost money when they invested in it. Often, that was because they invested too early. In their eagerness to get in on the “ground floor,” they bought tech stocks based mainly on potential improvements in the technology. But they failed to consider the political, financial and practical obstacles that new technology always faces.
Pioneering tech stocks rarely live up to their potential
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Wall Street Stock Forecaster will soon unveil its #1 U.S. stock for 2010 — here’s how you can profit
On January 22, Wall Street Stock Forecaster, our newsletter that focuses on the U.S. stock markets, will unveil a stock with the right mix of strong fundamentals and technological know-how to earn big profits in 2010 and beyond. In fact, we think this company’s prospects are so bright we’ve named it Wall Street Stock Forecaster’s #1 stock pick for the coming year. This company is already a major global player in its industry. But that doesn’t mean it’s resting on its laurels. It’s solidly focused on fuelling its growth, and has done so in a number of ways: It recently made a string of smart acquisitions that have both enhanced its products and helped it expand geographically. To top it off, its high research and development spending will continue to keep it way ahead of the competition....
On January 15, Stock Picker’s Digest, our newsletter for aggressive investing, will unveil a stock that’s well positioned for explosive profits in 2010 — and if you hold it for a couple of years, there’s a great chance that it could skyrocket even further. In fact, we think this company’s prospects are so bright we’ve named it Stock Picker’s Digest’s #1 stock pick for the coming year. This Canadian firm has staked out a strong position in its industry. Plus, its low cost structure puts it in a strong position to profit as the economy recovers. And these advantages are only the beginning. The company has recently made a big investment in improving its computer systems. And it has a great reputation for customer service — an often underappreciated factor in attracting and retaining clients....
When you subscribe to The Successful Investor, our flagship publication, you get access to three high-quality portfolios we’ve built to help you profit over the long term. We update all three regularly, and keep them under constant review to make sure you always get our very best picks among high return investments. (We’ve updated our buy/sell/hold advice on a company we’ve covered in our Portfolio for Aggressive Growth below. Read on for further details.)...
Growth stocks are companies whose earnings growth is expected to be above the market average. These firms often pay little or no dividends. Instead, they invest any extra money in furthering their growth. These stocks are long-term investments. They can be well-known stars or quiet gems, but they share the common trait of growing at a higher than average rate within their industry, or within the market as a whole. (You can get all the details on how to select appropriate stocks for your portfolio in our new special report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.” Click here to download this free report and get started right away.)...
NCR CORP. $11 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.2 million; Market cap: $1.8 billion; Price-to-sales ratio: 0.4; No dividends paid; WSSF Rating: Average) has a broader product line than Diebold, and gets just a third of its revenue from making and servicing ATMs. The rest comes from selling checkout scanners, cash registers and self-serve kiosks. NCR’s revenue rose slightly, from $6.0 billion in 2004 to $6.1 billion in 2006. Revenue fell to $5.0 billion in 2007, after NCR spun off Teradata Corp., but rose to $5.3 billion in 2008. Despite the slow sales growth, the company’s earnings rose from $0.89 a share (or a total of $171 million) in 2004 to $2.13 a share (or $389 million) in 2006. Earnings fell to $1.39 a share (or $254 million) in 2007, but rose to $1.61 a share (or $271 million) in 2008. Like Diebold, most of NCR’s earnings gains came from lower costs, mainly because it outsourced much of its ATM production to other companies. It’s also cutting 10% of its workforce. The layoffs should save it $250 million a year by the end of 2011....
DIEBOLD INC. $27 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 66.3 million; Market cap: $1.8 billion; Price-to-sales ratio: 0.6; Dividend yield: 3.9%; WSSF Rating: Average) makes automated teller machines (ATMs), as well as safes, vaults and building security systems. To cut its reliance on ATMs and related equipment, Diebold is offering more services to its banking customers. These include managing ATM networks, processing customer transactions and upgrading software. Diebold now gets over half of its revenue from these types of services. The company recently sold its electronic-voting machine business (Premier Election Solutions, Inc.) for $12.1 million. That’s a lot less than the $24.7 million that Diebold paid for this business in 2002. If you account for the money that the company invested into this subsidiary over the years, Diebold incurred a $50.8-million pre-tax loss on the sale....
THE STANLEY WORKS $52 (New York symbol SWK, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 80.4 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.5%; WSSF Rating: Average) makes a wide variety of hand and power tools for consumer and industrial users. Top brands include Stanley, FatMax and Powerlock. Stanley has agreed to buy rival toolmaker Black & Decker Corp. (New York symbol BDK) for $4.5 billion in stock. Assuming both companies’ shareholders approve, the deal should close in the first half of 2010. Stanley shareholders will own 50.5% of the combined company (to be called Stanley Black & Decker). Black & Decker investors will own the remaining 49.5%. This looks like a good move for Stanley. Black & Decker specializes in power tools, so there’s little overlap with Stanley’s hand tools. Moreover, Black & Decker’s security products, which include door locks and keyless-entry systems, are a nice fit with Stanley’s building-security business....
SNAP-ON INC. $40 (New York symbol SNA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 57.7 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.0%; WSSF Rating: Average) makes hand and power tools for auto mechanics. It sells these through franchised vans that visit garages. This lets it build closer relationships with customers, which gives it an advantage over competitors. It also keeps Snap-On’s distribution costs down. Many U.S. carmakers have closed dealerships in response to weak sales. This has cut the number of repair shops that Snap-On can supply. Snap-On’s earnings fell 53.5% in the three months ended October 3, 2009, to $25.4 million, or $0.44 a share. A year earlier, it earned $54.6 million, or $0.94 a share....