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.
Read More
Close
APACHE CORP. $60 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 334.7 million; Market cap: $20.1 billion; Price-to-sales ratio: 1.7; WSSF Rating: Average) explores for and produces oil and natural gas, mostly in North America. Apache prefers to sell its oil at the current spot price, instead of locking in prices through hedging contracts. This strategy let it take full advantage of rising oil and natural-gas prices in the first half of 2008. Thanks to a 27.5% rise in its average oil prices, and a 25.5% jump in gas prices, Apache’s 2008 earnings rose 30.5%, to $3.8 billion from $2.9 billion in the prior year. Earnings per share climbed 29.6%, to $11.22 from $8.66. The 2008 earnings exclude a $3.6-billion writedown of Apache’s properties that was caused by falling energy prices in the second half of 2008. This is a non-cash accounting adjustment, and had no impact on the company’s cash balances. Apache’s revenue rose 23.9%, to $12.4 billion from $10 billion....
ENCANA CORP. $38 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 750.4 million; Market cap: $28.5 billion; Price-to-sales ratio: 0.7; WSSF Rating: Average) is a leading North American producer of natural gas and oil. Natural gas accounts for about 80% of EnCana’s production. EnCana focuses on what it calls “key resource plays”. These are unconventional properties, such as early-stage gas fields and oil-sands projects, that have much longer production lives than conventional properties. EnCana’s oil-sands operations consist of two 50- 50 joint ventures with ConocoPhillips — one operates the oil-sands properties, while the other processes the heavy, tar-like oil at refineries in Texas and Illinois. Oil-sands projects cost more to operate and face greater environmental opposition than regular oil fields, so this arrangement cuts EnCana’s risk....
CHEVRON CORP. $64 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2 billion; Market cap: $128 billion; Price-to-sales ratio: 0.7; WSSF Rating: Above Average) is the second-largest integrated oil company in the United States, after ExxonMobil. Oil production supplied 86% of its earnings in 2008; the remaining 14% came from its refineries and retail gas stations. In response to weaker energy prices, Chevron aims to conserve cash by temporarily suspending its sharebuyback program. (In 2008, it repurchased $8 billion of its stock.) It now holds $9.6 billion, or $4.70 a share, in cash, and its total debt of $8.9 billion is a low 7% of its market cap. In 2008, Chevron’s earnings rose 28.1%, to $23.9 billion from $18.7 billion in 2007. Earnings per share rose 33.1%, to $11.67 from $8.77 on fewer shares outstanding. (Chevron’s 2008 earnings included a $600-million gain on the swap of some properties.) Revenue rose 23.6%, to $273 billion from $220.9 billion. Higher oil prices in 2008 offset a 3.4% drop in overall production, mainly due to the disruption caused by hurricanes at its offshore platforms in the Gulf of Mexico....
AUTODESK INC. $14 (Nasdaq symbol ADSK; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 226.3 million; Market cap: $3.2 billion; Price-to-sales ratio: 1.4; WSSF Rating: Average) makes computer-assisted design software that lets engineers and architects visualize, simulate and analyze the performance of their products early in the design process. This saves time and money, and improves the quality of the finished product. Slowing construction activity has hurt demand for Autodesk’s products. In response, the company plans to cut 10% of its workforce and consolidate some of its facilities. Severance and related expenses will cost it $65 million to $75 million. These cost-cutting plans should lower its annual expenses by $130 million. To put these figures in perspective, Autodesk earned $0.45 a share, for a total $104.5 million, in its third fiscal quarter, ended October 31, 2008, up 28.6% from $0.35 a share, or $84.8 million a year earlier. If you disregard a number of non-recurring expenses and gains, earnings per share rose 14.3%, to $0.56 from $0.49. Revenue improved 12.8%, to $607.1 million from $538.4 million. These gains were largely the result of favourable foreign exchange rates and strong sales in emerging markets. International sales account for about 80% of Autodesk’s revenue....
SYMANTEC CORP. $14 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 821 million; Market cap: $11.5 billion; Price-to-sales ratio: 1.9; WSSF Rating: Average) makes software that protects computers from viruses and intruders. The company is best known for its top-selling Norton Anti-Virus program. Products aimed at individual computer users supply 30% of Symantec’s revenue, and half of its earnings. Symantec mainly sells its products in retail stores and through online downloads. It also encourages users to renew their licences every year. Selling anti-virus products on a subscription basis gives Symantec predictable revenue streams and cuts its risk. Symantec continues to increase its focus on selling security software and other services to corporate customers, mostly through companies it has acquired. Symantec’s biggest acquisition to date was its $13.5-billion, all-stock purchase of data-storage specialist Veritas in July 2005....
EUROPEAN GOLDFIELDS $3.53 (Toronto symbol EGU; SI Rating: Speculative) (44 (20) 7408 9534; www.egoldfields.com; Shares outstanding: 179.4 million; Market cap: $633.2 million) holds a 95% interest in Hellas Gold. Hellas owns three gold and base-metal deposits in northern Greece: the Stratoni zinc/ lead/silver property, the Olympias gold/zinc/lead/silver project and the Skouries copper/gold property. Production at Stratoni started in September 2005. Permits to develop the Skouries and Olympias projects are moving steadily forward....
CENTERRA GOLD $5.30 (Toronto symbol CG; SI Rating: Speculative) (416-204-1953; www.centerragold.com; Shares outstanding: 216.3 million; Market cap: $1.1 billion) owns 100% of the large Kumtor gold mine in Kyrgyzstan and 100% of the Boroo gold mine in Mongolia. Centerra also holds joint-venture exploration prospects in Nevada, Turkey and Russia, and 100% of the Gatsuurt property in Mongolia. Cameco Corp. owns 53% of Centerra. In the three months ended December 31, 2008, Centerra’s revenues rose 170%, to $241.3 million from $89.4 million. (All figures except share price in U.S. dollars.) Earnings, excluding one-time items, were $0.20 a share, compared to a loss of $0.12 a share a year earlier. Cash flow was $0.48 a share in the latest quarter. Centerra holds cash of $167.4 million, or $0.77 a share, and has no debt....
TUPPERWARE BRANDS CORP. $23 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 62 million; Market cap: $1.4 billion; Price to- sales ratio: 0.7; WSSF Rating: Above Average) makes plastic food and beverage containers, as well as beauty products. It sells its products through a network of independent dealers instead of traditional retail stores. This keeps its marketing costs low. Tupperware tends to do well when the economy slows. That’s because many people become Tupperware dealers as a way of supplementing their income. Demand for food storage containers also tends to rise during downturns, as more people eat at home instead of in restaurants. Tupperware gets more than 90% of its profits from outside of the United States. This makes it particularly vulnerable to a rising U.S. dollar, which hurts the contribution of its international operations. Still, Tupperware’s well-known brand continues to spur sales in emerging markets, such as China and India....
NEWELL RUBBERMAID INC. $9.21 (New York symbol NWL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 277.2 million; Market cap: $2.6 billion; Price-to-sales ratio: 0.3; WSSF Rating: Average) makes a wide variety of household products, such as plastic storage bins, tools and pens. International markets account for 30% of its revenue. The company’s total term debt was $2.9 billion as of December 31, 2008, which is a high 110% of its market cap. Of that total, $752.7 million is due within one year. Newell generated $546.6 million in cash flow in 2008, so it should have little trouble meeting its obligations. The company also held cash of $275.4 million, or $1.00 a share. Newell aims to conserve cash by accelerating its current restructuring plan, which includes temporarily shutting down some of its plants to reduce inventory levels. Excluding unusual items, Newell will probably earn $1.19 a share in 2009. The stock trades at 7.7 times that estimate. To conserve cash, the company recently cut its dividend by 50%, from $0.84 a share to $0.42. It now yields 4.6%....
FAIR ISAAC CORP. $16 (New York symbol FIC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 48.5 million; Market cap: $776 million; Price-to-sales ratio: 1.0; WSSF Rating: Average) provides products and services that help businesses around the world make better decisions on customer creditworthiness. Its main business is its FICO software, which lets creditors use information about a customer to calculate a credit score. In the fiscal year ended September 30, 2008, Fair Isaac’s revenue fell 5.0%, to $744.8 million from $784.2 million. Sales growth has slowed along with increasing problems in credit markets. Earnings per share fell by 15.5%, to $1.64 from $1.94. Fair Isaac now aims to expand the use of its FICO score in the face of growing competition; new deals with banks and credit unions will allow them to give free FICO scores to their customers. Helping borrowers improve their credit scores should also lead to fewer loan losses for Fair Isaac’s clients....