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
SYMANTEC CORP. $14 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 839.1 million; Market cap: $11.7 billion; WSSF Rating: Average) has agreed to buy U.K.-based MessageLabs for $695 million in cash....
AMEREN CORP. $40 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 209.5 million; Market cap: $8.4 billion; WSSF Rating: Average) provides electricity and natural gas to customers in Illinois and Missouri. The floods in the Midwest had little effect on Ameren. However, the company needs to spend about $1 billion in the next two years to upgrade some of its plants. About half of that will go to improving the environmental performance of its coal-fired power plants (coal accounts for 85% of its fuel needs). Ameren will probably recover most of these expenses through higher rates. Meanwhile, in the three months ended March 31, 2008, the company earned $0.64 a share (total $134 million) before one-time costs. That’s 8.6% less than the $0.70 a share ($145 million) it earned in the year-earlier quarter, mainly due to higher fuel costs. Revenue rose 5.0%, to $2.1 billion from $2.0 billion....
ALLIANT ENERGY CORP. $33 (New York symbol LNT; Income Portfolio, Utilities sector; Shares outstanding: 110.4 million; Market cap: $3.6 billion; WSSF Rating: Average) supplies electricity and natural gas to customers in Wisconsin, Iowa, Minnesota and Illinois. Recent flooding forced the company to suspend operations at two of its generating stations in Cedar Rapids, Iowa. Although insurance will help cover some of its losses, the company estimates the flood will cut its 2008 earnings by $0.20 a share. To put that estimate in perspective, Alliant earned $0.62 a share (total $68.1 million) in the first quarter of 2008, up 10.7% from $0.56 a share ($65.2 million) a year earlier. Revenue grew 8.7%, to $992.0 million from $912.7 million....
VERIGY LTD. $23 (Nasdaq symbol VRGY; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 60.2 million; Market cap: $1.4 billion; WSSF Rating: Extra risk) makes equipment that chipmakers like Intel, Texas Instruments and Nvidia use to test their products. Verigy’s products help its customers cut down on production errors, and improve their profits. The company designs its test systems itself, then hires a contract manufacturer to make its products. Verigy spends about 12% of its revenue of $12.80 a share on research. This spending has helped it develop testing systems for more complex chips, such as the “system-on-a-chip”, which concentrates a wide variety of functions onto a single chip. Use of this design is expanding, since it helps manufacturers cut costs. This design also uses less power and is more reliable than multiple chip configurations....
NVIDIA CORP. $12 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 554.7 million; Market cap: $6.7 billion; WSSF Rating: Average) specializes in 3D graphics chips for computers, video game consoles and other electronic devices. The company focuses on chip design, and outsources most of its production to chipmakers in Asia. Nvidia got as high as $40 in October 2007, but has dropped recently due to fears that a slowing economy will hurt computer sales. Strong price competition from chief rival Advance Micro Devices, which makes graphic chips under the ATI brand, could also hurt Nvidia’s profit margins. The company now feels its revenue in its second fiscal quarter ending July 27, 2008 will fall to between $875 million and $950 million, down from its earlier forecast of $1.1 billion....
TEXAS INSTRUMENTS INC. $25 (New York symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.3 billion; Market cap: $32.5 billion; WSSF Rating: Average) makes chips for a wide variety of electronic devices, including mobile phones, DVD players and digital cameras. Chips accounted for 96% of the company’s revenue in 2007. The remaining 4% came from handheld calculators and other products. The company has more than 50,000 customers, but mobile phone maker Nokia Corp. accounted for 15% of its 2007 revenue. Nokia now plans to cut its reliance on Texas Instruments for most its chips. However, newer phones use chips that compress processing power into a single chip, instead of spreading these functions across several chips. Texas Instruments is a leading maker of these enhanced chips, so Nokia will likely remain a significant customer....
INTEL CORP. $22 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.7 billion; Market cap: $125.4 billion; WSSF Rating: Above average) is the world’s largest maker of computer chips, with roughly 80% of the global market. Intel currently spends about 16% of its revenue of $6.75 a share on research. This spending has led to several highly profitable products in the past few years. A good example is its multi-core processor chips, which let computers perform several tasks simultaneously. The company has also had great success with its Centrino platform for mobile computers. Centrino combines a processor, memory chips and high-speed wireless technology. It also consumes less power than other mobile platforms....
BANK OF AMERICA CORP. $33 (New York symbol BAC; Conservative Growth Portfolio, Finance sector; Shares outstanding: 4.5 billion; Market cap: $148.5 billion; WSSF Rating: Above average), has reported better-than-forecast profits for the second quarter despite rising losses from its mortgage operations. Earnings in the quarter fell 43.8%, to $0.72 a share from $1.28 a year earlier. These figures do not include mortgage lender Countrywide Financial Corp., which Bank of America acquired on July 1, 2008. We feel the purchase will expand Bank of America’s long-term earnings. However, it will probably take it several months to restructure Countrywide. Bank of America is a hold.
THE WESTERN UNION CO. $28 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 740.0 million; Market cap: $20.7 billion; WSSF Rating: Above average) provides money transfer and foreign exchange services. It operates in more than 200 countries through a network of 335,000 agents, such as post offices, banks and retailers. Over 80% of Western Union’s agents are located outside of the United States. The company began operations in 1851, and was one of the original 11 companies included in the Dow Jones average. In recent years, Western Union was a wholly owned subsidiary of First Data Corp. On September 29, 2006, First Data spun off Western Union to its own stockholders as a special dividend. Western Union’s main business is consumer-to-consumer transfers of money, which accounts for roughly 85% of its total revenue. The company charges the sender a fee based on the size of the transfer and the destination. Western Union also makes money on the conversion of funds from one foreign currency to another. In 2007, it processed 167.7 million transactions, up 14% from 2006....
OILEXCO INC. $16.27 (Toronto symbol OIL; SI Rating: Speculative) (403-262-5441; www.oilexco.com; Shares outstanding: 221.5 million; Market cap: $3.6 billion) reported cash flow of $0.64 a share on revenues of $172.4 million in the three months ended March 31, 2008. (All figures except share price and market cap in U.S. dollars). The company’s shares now trade at 6.4 times annualized cash flow based on the latest quarter. Year-earlier figures are not relevant as production only started up in June, 2007 at the company’s 100%- owned Brenda and 70%-owned Nicol oil finds in the UK North Sea. Production averaged 20,714 barrels of oil per day in the latest quarter. Oilexco estimates that production from the three wells in Brenda and one well in Nicol will average 30,000 barrels of oil a day by next year. Combined with expected output from its 100%-owned Shelley field and its 40% Huntington interest, 2009 production could average over 54,000 barrels per day. That should give the company annual cash flow of around $6.30 a share. The stock now trades at just 2.6 times that estimate....