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.
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COMPTON PETROLEUM $11.69 (Toronto symbol CMT; SI Rating: Speculative) (403-237-9400; www.comptonpetroleum.com; Shares outstanding: 128.2 million; Market cap: $1.5 billion) produces oil and natural gas in Alberta. In the three months ended September 30, 2006, Compton’s revenue fell 13.9%, to $124.9 million from $145.1 million. Cash flow per share fell 19%, to $0.47 from $0.58. Compton’s average daily production rose 13.1% in the latest quarter, to 32,843 barrels of oil equivalent from 29,041 barrels. Production is weighted 28% toward crude oil and liquids and 72% natural gas....
OILEXCO INC. $6.76 (Toronto symbol OIL; SI Rating: Speculative) (403-262-5441; www.oilexco.com; Shares outstanding: 197.3 million; Market cap: $1.3 billion) is an oil and gas company focused on the UK North Sea. As some of the biggest pools of oil in the North Sea are depleted, most major oil and gas companies, such as British Petroleum and RoyalDutch/Shell, have withdrawn from actively exploring the region. However, they have left behind significant quantities of oil and natural gas. The UK government is now encouraging smaller companies such as Oilexco to explore and exploit those pools of oil and gas. Oilexco’s immediate promise now lies in the development of its 100%-owned Brenda and 70%-owned Nicol oil finds. Production from both fields is set to begin soon, with peak production rates expected to reach 35,000 barrels of oil per day....
ENDEV ENERGY INC. $1.19 (Toronto symbol ENE; SI Rating: Speculative) (1-888-739-4623; www.endevenergy.com; Shares outstanding: 88.9 million; Market cap: $105.8 million) explores for and develops oil and natural gas in central Alberta. In the three months ended September 30, 2006, Endev’s revenue fell 20.8%, to $14 million from $17.6 million. Cash flow per share fell 38.5%, to $0.08 from $0.13. Endev’s average daily output rose 11% in the latest quarter, to 3,746 barrels of oil equivalent from 3,376 barrels. In 2007, Endev plans to spend $40 million on exploration and development. It plans to raise output to around 4,300 barrels of oil equivalent....
GRAND PETROLEUM $3.75 (Toronto symbol GPP; SI Rating: Speculative) (403-231-8400; www.grandpetroleum.com; Shares outstanding: 24.0 million; Market cap: $89.9 million) explores for and develops oil and natural gas in central Alberta. It has also started drilling in southeast Saskatchewan. In the three months ended September 30, 2006, Grand’s revenue rose 16.6%, to $13.8 million from $11.8 million. Cash flow per share rose 11.1%, to $0.30 from $0.27. The company’s shares now trade for just 3.1 times cash flow. Grand’s average daily production rose 31.2% in the latest quarter, to 2,755 barrels of oil equivalent from 2,095 barrels. Production is weighted 67% toward crude oil and liquids and 33% natural gas....
ANHEUSER - BUSCH COMPANIES INC. $47 (New York symbol BUD; Conservative Growth Portfolio, Consumer sector; WSSF Rating: Above average) is the world’s largest brewer. Leading brands include Budweiser, Michelob and Busch. Beer supplies 80% of its revenue. The other 20% comes from theme parks and aluminum can recycling. In the third quarter of 2006, earnings rose 26.2%, to $0.82 a share from $0.65 a year earlier. However, if you disregard the costs of a lawsuit settlement in the year-earlier quarter, profits grew 7.9%. Sales rose 4.9%, to $4.3 billion from $4.1 billion. The company has roughly half of the beer market in the United States. Due to slowing domestic beer sales, the company has expanded its international operations in the past few years. It owns half of Mexico’s largest brewer (Modelo) and 27% of China’s main brewer (Tsingtao). A new deal to distribute Budweiser in Paraguay, where beer sales are rising 10% a year, should also expand international sales....
MOLSON COORS BREWING CO. $70 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; WSSF Rating: Average) took its present form in February 2005 through the merger of Adolph Coors Co. and Molson Inc., a Canadian brewer. It is now the world’s fifth-largest brewer by volume. Major brands include Molson Canadian, Coors Light and Carling. The two companies merged because they felt they were too small to compete effectively with global brewers that enjoy large economies of scale. The merged company’s main goal was to cut its annual costs by $175 million in the first three years. Molson Coors now feels it can save a further $75 million by the end of 2008. That would give it $250 million in annual savings. Thanks to these savings, Molson Coors earned $1.56 a share (total $135.8 million) in the third quarter ended September 24, 2006, up 23.8% from $1.26 a share ($108.2 million) a year earlier. These figures included special charges of $28.5 million in the most recent quarter, and $33.5 million in the year-earlier quarter. Sales grew 3.3%, to $1.58 billion from $1.53 billion....
HONDA MOTOR CO. LTD. ADRs $35 (New York symbol HMC; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Above average) is the world’s seventh-largest carmaker. It also makes motorcycles as well as home and garden equipment like lawnmowers and snowblowers. Japan accounts for about a third of its sales. In its second fiscal quarter ended September 30, 2006, Honda’s earnings fell 9.2%, to $0.59 per ADR (total $1.09 billion) from $0.65 per ADR ($1.2 billion) a year earlier. (Each ADR represents one common share.)...
TOYOTA MOTOR CORP. ADRs $120 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector, WSSF Rating: Above average) is Japan’s largest carmaker. The company is gaining market share, and will likely overtake General Motors as the world’s largest carmaker in terms of vehicles produced within the next few months. Toyota operates plants in Japan, the United States and 21 other countries. Sales outside of Japan account for two-thirds of its revenue....
MCDONALD’S CORP. $42 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; WSSF Rating: Above average) operates over 30,000 fast-food restaurants in over 120 countries, which sell mainly hamburgers, chicken, french fries and soft drinks. Foreign operations account for two-thirds of its sales and one-third of its profit. The company’s revenue grew steadily, from $14.9 billion in 2001 to $20.5 billion in 2005. Profits fell from $1.36 a share (total $1.8 billion) in 2001 to $1.32 a share ($1.7 billion) in 2002, but rose to $1.97 a share ($2.5 billion) in 2005. Much of McDonald’s recent success stems from its plan to improve the quality of its food and service. It replaced its low-priced meals, which sparked a price war with competitors, with better quality food that generates higher profits for the company. It also added healthier foods, like salads and fruits....
BECKMAN COULTER INC. $59 (New York symbol BEC; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) makes equipment that hospitals and clinics use to detect substances in blood and other bodily fluids. These machines help doctors diagnose patients for cancer, strep and other diseases. Beckman has installed more than 200,000 of its systems in about 130 countries. Overseas customers account for about half of its sales. Beckman’s revenue rose steadily, from $2.0 billion in 2001 to $2.4 billion in 2005. Profits grew from $2.21 a share (total $141.5 million) in 2001 to $3.21 a share ($210.9 million) in 2004....