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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Visa, a global leader in credit and debit payments, expands into the fast-growing area of online and mobile payment transactions.
We look at the world leader in methanol, Canadian growth stock Methanex, which has a good long-term outlook but concerns in the near term.
NVIDIA CORP. $21 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 543.5 million; Market cap: $11.4 billion; Price-to- sales ratio: 2.6; Dividend yield: 1.6%; 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. The company outsources most of its production to Asian chipmakers.
In its fiscal 2015 third quarter, which ended October 26, 2014, Nvidia’s revenue rose 16.3%, to a record $1.2 billion from $1.1 billion a year earlier. Earnings jumped 43.3%, to $220.4 million from $153.8 million. The company spent $810.0 million on share buybacks in the past nine months. As a result, its earnings per share rose 50.0%, to $0.39 from $0.26.
Nvidia spends around 30% of its revenue on research, which is helping it expand into new areas, particularly chips for mobile devices. Its new Tegra chips now power Google’s new Nexus 9 tablet and Chromebook laptop computer. The company also recently launched its own tablet, called Shield, specifically for video game enthusiasts.
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In its fiscal 2015 third quarter, which ended October 26, 2014, Nvidia’s revenue rose 16.3%, to a record $1.2 billion from $1.1 billion a year earlier. Earnings jumped 43.3%, to $220.4 million from $153.8 million. The company spent $810.0 million on share buybacks in the past nine months. As a result, its earnings per share rose 50.0%, to $0.39 from $0.26.
Nvidia spends around 30% of its revenue on research, which is helping it expand into new areas, particularly chips for mobile devices. Its new Tegra chips now power Google’s new Nexus 9 tablet and Chromebook laptop computer. The company also recently launched its own tablet, called Shield, specifically for video game enthusiasts.
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KRAFT HEINZ CO. $75 (www.kraftheinzcompany.com) earned $0.44 a share in the third quarter of 2015, down 4.3% from $0.46 a year earlier. Sales fell 9.0%, to $6.4 billion from $7.0 billion. If you exclude exchange rates and businesses it sold since the July 2015 merger of Kraft Foods Group and H.J....
BUCKEYE PARTNERS L.P. $67 (www.buckeye.com) is seeing strong demand for its oil-storage terminals as many producers store their crude instead of selling it at today’s depressed prices. However, lower prices are hurting revenue at Buckeye’s wholesaling business, which sells refined fuels, such as gasoline, home heating oil and propane....
UNITED TECHNOLOGIES CORP. $97 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 887.0 million; Market cap: $86.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.utc.com) has four main businesses: Climate, Controls & Security (30% of revenue, 32% of earnings) makes heating and air conditioning equipment under the Carrier brand, as well as burglar alarms and fire-safety products; Aerospace Systems (25%, 24%) makes enginecontrol systems and other parts for aircraft; Pratt & Whitney (23%, 17%) manufactures aircraft engines; and Otis (22%, 27%) makes elevators.
Major takeover paid off
The company’s revenue rose 7.1%, from $54.3 billion in 2010 to $58.2 billion in 2011. In 2012, it paid $18.3 billion for North Carolina-based Goodrich Corp., which makes aircraft parts (such as landing gear, wheels and brakes) and maintains and fixes planes. However, it also sold smaller businesses, so its revenue fell 0.8%, to $57.7 billion, in 2012.
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Major takeover paid off
The company’s revenue rose 7.1%, from $54.3 billion in 2010 to $58.2 billion in 2011. In 2012, it paid $18.3 billion for North Carolina-based Goodrich Corp., which makes aircraft parts (such as landing gear, wheels and brakes) and maintains and fixes planes. However, it also sold smaller businesses, so its revenue fell 0.8%, to $57.7 billion, in 2012.
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DIEBOLD INC. $34 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 65.0 million; Market cap: $2.2 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.4%; TSINetwork Rating: Average; www.diebold.com) is buying German ATM maker Wincor Nixdorf AG for $1.8 billion (80% in cash and 20% in stock).
The combined firm will be the world’s largest maker of ATMs, with 35% of the market and $5.2 billion in annual revenue. Diebold aims to close the deal in mid-2016.
The company plans to borrow $2.8 billion to pay for Wincor, which will increase its total debt to around $3.5 billion. However, it should save $160 million a year by eliminating overlapping operations, which will help it pay down this debt. It will also cut its dividend rate by 67%, from $1.15 to $0.38, which would yield 1.1%.
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The combined firm will be the world’s largest maker of ATMs, with 35% of the market and $5.2 billion in annual revenue. Diebold aims to close the deal in mid-2016.
The company plans to borrow $2.8 billion to pay for Wincor, which will increase its total debt to around $3.5 billion. However, it should save $160 million a year by eliminating overlapping operations, which will help it pay down this debt. It will also cut its dividend rate by 67%, from $1.15 to $0.38, which would yield 1.1%.
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SHERWIN-WILLIAMS CO. $276 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 93.1 million; Market cap: $25.7 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.0%; TSINetwork Rating: Above Average; www.sherwin-williams.com) reported $3.15 billion of sales in the three months ended September 30, 2015, unchanged from a year earlier. Consumers bought more paint, offsetting lower sales to industrial clients and weakness in Latin America. Excluding exchange rates, sales gained 3.7%.
Earnings rose 14.8%, to $374.5 million from $326.2 million. Per-share profits gained 18.5%, to $3.97 from $3.35, on fewer shares outstanding. For all of 2015, the company expects to earn $10.75 to $11.00 a share. However, the stock is expensive at 25.4 times the midpoint of that range.
Sherwin-Williams is a hold.
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Earnings rose 14.8%, to $374.5 million from $326.2 million. Per-share profits gained 18.5%, to $3.97 from $3.35, on fewer shares outstanding. For all of 2015, the company expects to earn $10.75 to $11.00 a share. However, the stock is expensive at 25.4 times the midpoint of that range.
Sherwin-Williams is a hold.
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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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