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. $61 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.1 billion; Market cap: $67.1 billion; WSSF Rating: Above average) operates over 31,400 fast food restaurants in 118 countries. Much of McDonald’s recent growth comes from its overseas operations, which provide two-thirds of its sales and half of its earnings. That’s mainly because growing prosperity is making the company’s products more affordable in developing countries. The higher value of most foreign currencies compared with the U.S. dollar has also expanded the contribution from McDonald’s international operations. The company also continues to enjoy the benefits from a major overhaul of its operations in 2002. This included slowing the growth of new stores. Instead, it focused on re-modeling older stores to encourage repeat visits. It also added healthier foods such as salads to its menu, to appeal to health-conscious consumers who usually avoid fast food. McDonald’s also sold its investments in several casual dining chains....
WINDSTREAM CORP. $11 (New York symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 439.6 million; Market cap: $4.8 billion; WSSF Rating: Average) provides local and long distance telephone service to 3.1 million customers in 16 states. Most of its customers are in rural areas. Windstream has no wireless operations, so it aims to spur growth with high-speed Internet services. Recent upgrades to its systems have expanded high-speed availability to 93% of its customers. Just 45% of its residential customers currently use highspeed service, so there’s lots of room to grow. As well, Windstream’s focus on rural areas limits competition from larger phone and cable companies....
AT&T INC. $29 (New York symbol T; Income Portfolio, Utilities sector; Shares outstanding: 5.9 billion; Market cap: $171.1 billion; WSSF Rating: Average) provides traditional local and long-distance telecommunication services to over 59 million customers in 22 states. It also has 73 million wireless subscribers nationwide, and 14.7 million high-speed Internet customers. Unlike Verizon, AT&T gets just half of its earnings from its wireless business. However, demand for its wireless services is growing strongly. That’s partly due to AT&T’s exclusive deal to sell Apple’s iPhone. AT&T offers the iPhone at a discount to entice customers to sign a long-term contract. As part of a new deal with Apple, AT&T will now pay more to subsidize the initial cost of the latest version of the device. However, the new iPhone can access the Internet and receive email much more quickly than the older version. Rising revenues from Internet use should help AT&T offset the higher subsidies....
EUROPEAN GOLDFIELDS $3.06 (Toronto symbol EGU; SI Rating: Speculative) (44 (20) 7408 9534; www.egoldfields.com; Shares outstanding: 179.4 million; Market cap: $548.9 million) holds a 95% interest in Hellas Gold. Hellas owns three gold and base metal deposits in Northern Greece. The deposits are the Stratoni zinc/ lead/silver property, the Olympias gold/zinc/lead/silver project and the Skouries copper/gold property. Production started at Stratoni in September 2005. Permits to develop the Skouries and Olympias projects are moving steadily forward. European Goldfields also owns 80% of the Certej gold/silver project in Romania, where it has completed a positive feasibility study, and applied for environmental approval and a mining permit. The company also owns 51% of a joint venture developing a goldcopper project in northeastern Turkey....
NEW GOLD $4.20 (Toronto symbol NGD; SI Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 212.1 million; Market cap: $891.0 million) is the result of the merger completed on June 30, 2008 of three companies: Peak Gold, symbol PIK on Toronto, Metallica Resources, symbol MR on Toronto, and New Gold, symbol NGD on Toronto. New Gold operates three mines: the Peak gold/ copper mine in Australia, the Cerro San Pedro gold/ silver mine in Mexico and the Amapari gold mine in Brazil. New Gold expects to produce 297,000 ounces of gold in 2008 and 350,000 ounces in 2009. The company also has $319 million in cash to expand production at the Amapari mine, to develop the El Morro gold/copper mine in Chile and to develop the gold/ silver/copper Afton mine in British Columbia....
IAMGOLD $5.94 (Toronto symbol IMG; SI Rating: Speculative) (1-888-464-9999; www.iamgold.com; Shares outstanding: 295.6 million; Market cap: $1.8 billion) has interests in eight operating gold mines: 100% of the Mupane gold mine in Botswana, 38% of the Sadiola gold mine and 40% of the Yatela gold mine, both located in Mali, 18.9% interests in both the Tarkwa and Damang gold mines in Ghana, 100% of the Doyon mine and the Sleeping Giant mine, both in Quebec, and 100% of the Rosebel mine in Suriname, South America. IAMGold also a 1% royalty interest in the Diavik diamond mine in northern Canada and 100% of the Niobec niobium mine in Quebec. It has development projects and exploration activities in Africa, as well as in North and South America. The company reported a sharp rise in cash flow in the three months ended June 30, 2008, to $70.5 million or $0.24 a share, from $23 million or $0.08 a share (All figures except share price and market cap in U.S. dollars.) Revenues rose 34.5%, to $225.1 million from $167.3 million, largely due acquisitions....
YAMANA GOLD $9.99 (Toronto symbol YRI; SI Rating: Speculative) (416-815-0220; www.yamana.com; Shares outstanding: 699.5 million; Market cap: $7.0 billion) owns and operates seven operating mines in five countries in North and South America, along with interests in two others plus five development stage properties. It also holds extensive exploration properties. Yamana’s revenues in the three months ended June 30, 2008 rose 83.5%, to $336.9 million from $183.7 million a year earlier. (All figures except share price and market cap in U.S. dollars.) Last year’s acquisitions of Meridian Gold and Northern Orion Resources accounted for most of the increase. Cash flow rose 94.1%, to $176.5 million from $90.9 million. However, cash flow per share was unchanged at $0.26 due to a 93.3% rise in shares outstanding following the acquisitions. Excluding onetime items, earnings per share fell 31.8%, to $0.15 from $0.22....
DIAMONDS NORTH RESOURCES $0.60 (Toronto symbol DDN; SI Rating: Start-up) (1-866-802-2010; www.diamondsnorthresources.com; Shares outstanding: 74.4 million; Market cap: $44.7 million) has interests in 10 projects covering over eight million exploration acres in Nunavut and the Northwest Territories. Its prospects range from early to advanced-stage exploration. Diamonds North’s leading prospect is its 100%- held Amuruk project in Nunavut. To date, the company has discovered 22 kimberlites, of which drilling on two has produced microdiamonds and some macrodiamonds. Diamonds North is now conducting bulk samples on the property to test for a higher-percentage of more commercially viable macro-diamonds. The company is also at an advanced stage with its Hepburn project in the Northwest Territories, where it has identified over 200 drilling targets. Diamonds North’s other active project is on Banks Island in the Northwest Territories, where airborne surveys have identified a number of anomalies that it believes are kimberlite pipes. De Beers Canada is active in the area....
STORNOWAY DIAMOND CORP. $0.22 (Toronto symbol SWY; SI Rating: Start-up) (1-888-338-2200; www.sornowaydiamonds.com; Shares outstanding: 227.2 million; Market cap: $50.0 million) holds interests in over 14 diamond exploration properties in Canada and one in Botswana. TSE-listed Agnico-Eagle holds a 17.7% interest in the combined company. Global mining giant Rio Tinto Limited holds an 11.2% interest. Stornoway’s projects include a 50% interest in the Renard diamond project in Quebec, which has the potential to become Quebec’ s first diamond mine. Bulk sampling has produced promising carat-grade recoveries. The project is now in the pre-feasibility stage to define a total resource estimate. Renard is the company’s most advanced project, but close behind is the Aviat project on the Melville Peninsula in the eastern Arctic. This project is a joint venture between Stornoway (90%) and Hunter Exploration (10%). The partners have discovered 12 kimberlites at the Aviat project. Early results have shown high sample grades of diamonds....
CINTAS CORP. $31 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 153.7 million; Market cap: $4.8 billion; WSSF Rating: Average) sells and rents uniforms to over 800,000 businesses in the United States and Canada. Uniforms and other business supplies such as entrance mats, mops and hygiene products account for 85% of Cintas’s revenue. The remaining 15% comes from a variety of other business services. These include first aid kits, fire extinguishers and smoke alarms, and document storage and shredding services. Cintas’s stock fell to around $25 in July 2008 due to fears that the recent downturn will prompt businesses to curtail spending on uniforms and other supplies. Rising fuel prices have also increased Cintas’s delivery costs....