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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MONSANTO CO. $96 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 439.8 million; Market cap: $42.2 billion; Price-to-sales ratio: 2.8; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.monsanto.com) plans to cut 12% of its workforce over the next two years. That’s because low prices for corn, soybeans and wheat are prompting farmers to buy fewer of its genetically modified seeds and other agricultural products.
The company now expects the cuts to save it $500 million annually by fiscal 2018 (fiscal years end August 31), up from its earlier target of $300 million. Monsanto earned $2.8 billion, or $5.73 a share, in fiscal 2015.
Monsanto is still a buy.
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The company now expects the cuts to save it $500 million annually by fiscal 2018 (fiscal years end August 31), up from its earlier target of $300 million. Monsanto earned $2.8 billion, or $5.73 a share, in fiscal 2015.
Monsanto is still a buy.
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KEYSIGHT TECHNOLOGIES INC. $31 (New York symbol KEYS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.0 million; Market cap: $5.3 billion; Price-to-sales ratio: 1.8; No dividends paid; TSINetwork Rating: Average; www.keysight.com) reported a 2.6% revenue decline in its 2015 fiscal year, which ended October 31, 2015, to $2.86 billion from $2.93 billion in 2014. Excluding exchange rates, revenue rose 1%.
Before unusual items, earnings fell 15.0%, to $432 million from $508 million. Due to more shares outstanding, per-share earnings fell 17.1%, to $2.52 from $3.04. That’s partly because Keysight raised its research spending by 7.2%, to $387 million (or 13.6% of revenue) from $361 million (or 12.3%).
The company aims to shift away from manufacturing testing equipment for electronic devices to more profitable businesses like software and services. However, its short-term outlook is weak, which is why the stock trades at just 12.0 times the $2.59 a share Keysight will probably earn in fiscal 2016.
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Before unusual items, earnings fell 15.0%, to $432 million from $508 million. Due to more shares outstanding, per-share earnings fell 17.1%, to $2.52 from $3.04. That’s partly because Keysight raised its research spending by 7.2%, to $387 million (or 13.6% of revenue) from $361 million (or 12.3%).
The company aims to shift away from manufacturing testing equipment for electronic devices to more profitable businesses like software and services. However, its short-term outlook is weak, which is why the stock trades at just 12.0 times the $2.59 a share Keysight will probably earn in fiscal 2016.
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SNAP-ON INC. $171 (New York symbol SNA; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 58.1 million; Market cap: $9.9 billion; Price-to-sales ratio: 2.7; Dividend yield: 1.4%; TSINetwork Rating: Average; www.snapon.com) makes tools for auto mechanics and sells them through a fleet of franchised vans that visit garages. It also makes specialized tools for industrial customers.
Snap-On continues to expand beyond the U.S., which supplies 65% of its revenue. In August 2015, it paid $13.1 million for Ecotechnic, an Italian maker of equipment for maintaining vehicle air conditioning systems. The purchase should add roughly $13 million to Snap-On’s annual revenue.
The company is also seeing strong demand for its tools and other products. In the three months ended October 3, 2015, its revenue gained 1.9%, to $821.5 million from $806.3 million a year earlier. Excluding exchange rates and acquisitions, sales gained 7.3%. Earnings per share rose 12.5%, to $1.98 from $1.76.
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Snap-On continues to expand beyond the U.S., which supplies 65% of its revenue. In August 2015, it paid $13.1 million for Ecotechnic, an Italian maker of equipment for maintaining vehicle air conditioning systems. The purchase should add roughly $13 million to Snap-On’s annual revenue.
The company is also seeing strong demand for its tools and other products. In the three months ended October 3, 2015, its revenue gained 1.9%, to $821.5 million from $806.3 million a year earlier. Excluding exchange rates and acquisitions, sales gained 7.3%. Earnings per share rose 12.5%, to $1.98 from $1.76.
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GENUINE PARTS CO. $91 (New York symbol GPC; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 150.8 million; Market cap: $13.7 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.7%; TSINetwork Rating: Average; www.genpt.com) gets about half of its sales and earnings by selling replacement auto parts. The company operates 1,100 outlets under the NAPA banner, and its distribution business serves 4,900 independent stores in North America, Australia and New Zealand.
Genuine also distributes industrial parts, office products and electrical equipment. It gets 80% of its revenue from the U.S.
The company recently agreed to buy Covs Parts, an auto-parts distributor in Western Australia.
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Genuine also distributes industrial parts, office products and electrical equipment. It gets 80% of its revenue from the U.S.
The company recently agreed to buy Covs Parts, an auto-parts distributor in Western Australia.
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ARCHER DANIELS MIDLAND CO. $36 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 596.7 million; Market cap: $21.5 billion; Price-to-sales ratio: 0.3; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.adm.com) processes corn, wheat, soybeans, canola, flax seed, peanuts and other crops into a variety of food ingredients, such as flour, oils and sweeteners. It’s also the largest maker of ethanol from corn in the U.S.
In the three months ended September 30, 2015, Archer’s earnings fell 66.3%, to $252 million from $747 million a year earlier. It spent $1.8 billion on share buybacks in the first nine months of 2015, so per-share profits declined 64.0%, to $0.41 from $1.14, on fewer shares outstanding.
Without unusual items, mainly gains on asset sales, earnings per share fell 30.2%, to $0.60 from $0.86. Revenue declined 8.6%, to $16.6 billion from $18.1 billion. International markets supply half of the company’s revenue, so the high U.S. dollar hurts the contribution from its overseas operations. Record crop harvests have also depressed prices and profits at its grain-trading business.
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In the three months ended September 30, 2015, Archer’s earnings fell 66.3%, to $252 million from $747 million a year earlier. It spent $1.8 billion on share buybacks in the first nine months of 2015, so per-share profits declined 64.0%, to $0.41 from $1.14, on fewer shares outstanding.
Without unusual items, mainly gains on asset sales, earnings per share fell 30.2%, to $0.60 from $0.86. Revenue declined 8.6%, to $16.6 billion from $18.1 billion. International markets supply half of the company’s revenue, so the high U.S. dollar hurts the contribution from its overseas operations. Record crop harvests have also depressed prices and profits at its grain-trading business.
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NORDSTROM INC. $58 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 185.4 million; Market cap: $10.8 billion; Price-to-sales ratio: 0.7; Dividend yield: 2.6%; TSINetwork Rating: Average; www.nordstrom.com) is down 30% from its peak of $83 in March 2015. The company is seeing slowing sales, and it’s investing in new websites and stores in Canada. That’s squeezing its profit margins.
In its fiscal 2016 third quarter, which ended October 31, 2015, sales rose 6.5%, to $3.2 billion from $3.0 billion a year earlier. Same-store sales rose 0.9%, well below the consensus forecast of a 3.6% gain. Earnings fell 21.9%, to $0.57 a share from $0.73.
Nordstrom now expects same-store sales growth of 2.5% to 3.0% for all of fiscal 2016, down from its earlier forecast of 3.5% to 4.5%. It also cut its full-year earnings outlook to $3.35 a share from $3.75. The stock trades at 17.3 times the new estimate. That’s a reasonable multiple, as the company’s margins should improve once its new investments begin contributing to its profits.
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In its fiscal 2016 third quarter, which ended October 31, 2015, sales rose 6.5%, to $3.2 billion from $3.0 billion a year earlier. Same-store sales rose 0.9%, well below the consensus forecast of a 3.6% gain. Earnings fell 21.9%, to $0.57 a share from $0.73.
Nordstrom now expects same-store sales growth of 2.5% to 3.0% for all of fiscal 2016, down from its earlier forecast of 3.5% to 4.5%. It also cut its full-year earnings outlook to $3.35 a share from $3.75. The stock trades at 17.3 times the new estimate. That’s a reasonable multiple, as the company’s margins should improve once its new investments begin contributing to its profits.
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TUPPERWARE BRANDS CORP. $58 (New York symbol TUP; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 50.4 million; Market cap: $2.9 billion; Priceto- sales ratio: 1.2; Dividend yield: 4.7%; TSINetwork Rating: Above Average; www.tupperwarebrands.com) makes household goods, mainly plastic food and beverage containers, as well as cosmetics and fragrances.
In the three months ended September 26, 2015, Tupperware’s sales fell 11.5%, to $521.0 million from $588.7 million a year earlier. Overseas markets supplied 73% of Tupperware’s sales, so if you exclude the negative impact of the high U.S. dollar, sales rose 7%. Earnings declined 12.2%, to $0.79 a share from $0.90.
For all of 2015, the company expects its sales to rise 4% to 5%, along with earnings of $4.39 to $4.44 a share, excluding exchange rates. The stock trades at 13.1 times the midpoint of that range, which is reasonable in light of Tupperware’s large international operations. The $2.72 dividend seems safe and yields 4.7%.
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In the three months ended September 26, 2015, Tupperware’s sales fell 11.5%, to $521.0 million from $588.7 million a year earlier. Overseas markets supplied 73% of Tupperware’s sales, so if you exclude the negative impact of the high U.S. dollar, sales rose 7%. Earnings declined 12.2%, to $0.79 a share from $0.90.
For all of 2015, the company expects its sales to rise 4% to 5%, along with earnings of $4.39 to $4.44 a share, excluding exchange rates. The stock trades at 13.1 times the midpoint of that range, which is reasonable in light of Tupperware’s large international operations. The $2.72 dividend seems safe and yields 4.7%.
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NVIDIA CORP. $31 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 538.0 million; Market cap: $16.7 billion; Price-to-sales ratio: 3.5; Dividend yield: 1.5%; TSINetwork Rating: Average; www.nvidia.com) is a leading designer of 3D-capable video chips, which make video games run more smoothly and appear more lifelike.
Nvidia aims to cut its reliance on personal computers and smartphones by focusing on chips for games, high-definition TVs, cars and cloud computing. As part of this plan, it hoped to sell its Icera subsidiary, which designs mobile-phone chips. However, it was unable to find a buyer, so it now plans to wind down Icera in the next few months.
If you exclude a writedown of Icera and other unusual items, Nvidia earned $255 million in its fiscal 2016 third quarter, which ended October 25, 2015, up 15.9% from $220 million a year earlier. Per-share profits rose 17.9%, to $0.46 from $0.39, on fewer shares outstanding. Revenue gained 6.5%, to $1.3 billion from $1.2 billion.
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Nvidia aims to cut its reliance on personal computers and smartphones by focusing on chips for games, high-definition TVs, cars and cloud computing. As part of this plan, it hoped to sell its Icera subsidiary, which designs mobile-phone chips. However, it was unable to find a buyer, so it now plans to wind down Icera in the next few months.
If you exclude a writedown of Icera and other unusual items, Nvidia earned $255 million in its fiscal 2016 third quarter, which ended October 25, 2015, up 15.9% from $220 million a year earlier. Per-share profits rose 17.9%, to $0.46 from $0.39, on fewer shares outstanding. Revenue gained 6.5%, to $1.3 billion from $1.2 billion.
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CISCO SYSTEMS INC. $27 (Nasdaq symbol CSCO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.1 billion; Market cap: $137.7 billion; Price-to-sales ratio: 2.8; Dividend yield 3.1%; TSINetwork Rating: Average; www.cisco.com) is a leading maker of hardware and software that links and manages computer networks.
Its hardware includes routers, as well as local area network and asynchronous transfer mode switches. The company is selling or discontinuing less profitable products as it shifts toward better-selling technology, such as computer security systems and software.
Cisco recently sold its set-top-box and cable-modem business for $600 million. It will also phase out its Invicta products, which store data on flash chips instead of disk drives.
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Its hardware includes routers, as well as local area network and asynchronous transfer mode switches. The company is selling or discontinuing less profitable products as it shifts toward better-selling technology, such as computer security systems and software.
Cisco recently sold its set-top-box and cable-modem business for $600 million. It will also phase out its Invicta products, which store data on flash chips instead of disk drives.
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INTEL CORP. $34 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 4.7 billion; Market cap: $159.8 billion; Price-to-sales ratio: 2.9; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.intel.com) is the world’s leading chip maker. Its products power 80% of all personal computers.
In the three months ended September 26, 2015, Intel’s earnings fell 6.3%, to $3.1 billion from $3.3 billion a year earlier. The company repurchased $1.0 billion of its shares during the quarter, so per-share profits declined just 3.0%, to $0.64 from $0.66. Overall revenue slipped 0.6%, to $14.47 billion from $14.55 billion.
Revenue from chips for computers and mobile devices (59% of the total) fell 7.5%, partly because Intel is offering fewer subsidies to mobile-device makers.
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In the three months ended September 26, 2015, Intel’s earnings fell 6.3%, to $3.1 billion from $3.3 billion a year earlier. The company repurchased $1.0 billion of its shares during the quarter, so per-share profits declined just 3.0%, to $0.64 from $0.66. Overall revenue slipped 0.6%, to $14.47 billion from $14.55 billion.
Revenue from chips for computers and mobile devices (59% of the total) fell 7.5%, partly because Intel is offering fewer subsidies to mobile-device makers.
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