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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CONAGRA FOODS INC. $42 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 432.9 million; Market cap: $18.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.conagrafoods.com) makes packaged foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Peter Pan peanut butter, Orville Redenbacher popcorn and Reddi-wip whipped cream.
Consumers supply 70% of ConAgra’s sales. Businesses, including restaurants and other food makers, provide the remaining 30%. ConAgra’s sales jumped 44.2%, from $12.3 billion in 2011 to $17.7 billion in 2014 (fiscal years end May 31). That’s mainly due to its $4.75-billion acquisition of Ralcorp Holdings, the largest privatelabel food maker in the U.S., in January 2013.
However, the purchase didn’t work out as ConAgra hoped, so the company agreed to sell most of the Ralcorp business to TreeHouse Foods (New York symbol THS) for $2.7 billion in November 2015. Excluding Ralcorp, ConAgra’s overall sales fell to $15.8 billion in fiscal 2015.
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Consumers supply 70% of ConAgra’s sales. Businesses, including restaurants and other food makers, provide the remaining 30%. ConAgra’s sales jumped 44.2%, from $12.3 billion in 2011 to $17.7 billion in 2014 (fiscal years end May 31). That’s mainly due to its $4.75-billion acquisition of Ralcorp Holdings, the largest privatelabel food maker in the U.S., in January 2013.
However, the purchase didn’t work out as ConAgra hoped, so the company agreed to sell most of the Ralcorp business to TreeHouse Foods (New York symbol THS) for $2.7 billion in November 2015. Excluding Ralcorp, ConAgra’s overall sales fell to $15.8 billion in fiscal 2015.
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Top regional airline Chorus Aviation is a rising growth stock, but its affiliation with Air Canada may prove to bring as much risk as reward.
AASTRA TECHNOLOGIES $37.48 (Toronto symbol AAH; TSINetwork Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 11.8 million; Market cap: $430.6 million; Dividend yield: 2.1%) has jumped over 80% since we recommended it in our last issue.
< br /> The stock surged because Aastra agreed to a friendly takeover offer from business communications products and software rival Mitel Networks (symbol MNW on Toronto).
< br /> Mitel is offering $6.52 U.S. in cash and 3.6 of its common shares for each share of Aastra. Based on today’s price for Mitel stock, the offer is worth $38.60 per Aastra share.
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< br /> The stock surged because Aastra agreed to a friendly takeover offer from business communications products and software rival Mitel Networks (symbol MNW on Toronto).
< br /> Mitel is offering $6.52 U.S. in cash and 3.6 of its common shares for each share of Aastra. Based on today’s price for Mitel stock, the offer is worth $38.60 per Aastra share.
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WEIGHT WATCHERS INTERNATIONAL $26.61 (New York symbol WTW; TSINetwork Rating: Extra Risk) (212-589-2700; www.weightwatchers.com; Shares outstanding: 57.2 million; Market cap: $1.5 billion; No dividends paid) declined steadily from over $80 a share in 2012 to a recent low of just under $7. However, the shares jumped on October 19, 2015, when Oprah Winfrey said she had purchased 10% of the company.
Oprah bought 6.4 million shares for $6.79 each and has an option to purchase 3.5 million more at $6.97. She will also join the company’s board of directors.
Founded in 1961, Weight Watchers offers weightloss services in 23 countries. The company promotes a program of lifestyle changes through 36,000 weekly meetings and online. It gets 80% of its revenue through meeting fees and 20% from product sales.
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Oprah bought 6.4 million shares for $6.79 each and has an option to purchase 3.5 million more at $6.97. She will also join the company’s board of directors.
Founded in 1961, Weight Watchers offers weightloss services in 23 countries. The company promotes a program of lifestyle changes through 36,000 weekly meetings and online. It gets 80% of its revenue through meeting fees and 20% from product sales.
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INTACT FINANCIAL $88.20 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 131.5 million; Market cap: $11.5 billion; Dividend yield: 2.4%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink and belairdirect.
In the three months ended September 30, 2015, Intact’s revenue rose 9.4%, to $2.09 billion from $1.91 billion a year earlier. Revenue improved across all of the company’s insurance lines and geographic regions.
Earnings rose 7.6%, to $199 million, or $1.47 a share, from $185 million, or $1.37.
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In the three months ended September 30, 2015, Intact’s revenue rose 9.4%, to $2.09 billion from $1.91 billion a year earlier. Revenue improved across all of the company’s insurance lines and geographic regions.
Earnings rose 7.6%, to $199 million, or $1.47 a share, from $185 million, or $1.37.
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AGT FOOD & INGREDIENTS $31.83 (Toronto symbol AGT; TSINetwork Rating: Extra Risk) (306-525- 4490; www.agtfoods.com; Shares outstanding: 23.1 million; Market cap: $737.8 million; Dividend yield: 1.9%) buys and processes a range of pulses, which include peas, beans, lentils and chickpeas, as well as other specialty crops....
FIRSTSERVICE CORP. $48.83 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 34.6 million; Market cap: $1.8 billion; Dividend yield: 1.1%) is a leading North American provider of residential property management and property improvement services.
In the three months ended September 30, 2015, the company’s revenue gained 12.0%, to $349.5 million from $312.0 million a year earlier (all figures except share price and market cap in U.S. dollars). Excluding one-time items, earnings per share jumped 28.2%, to $0.50 from $0.39. The second and third quarters are FirstService’s busiest.
The company’s outlook remains strong. However, the stock trades at a high 30.5 times the $1.20 a share FirstService will likely earn this year.
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In the three months ended September 30, 2015, the company’s revenue gained 12.0%, to $349.5 million from $312.0 million a year earlier (all figures except share price and market cap in U.S. dollars). Excluding one-time items, earnings per share jumped 28.2%, to $0.50 from $0.39. The second and third quarters are FirstService’s busiest.
The company’s outlook remains strong. However, the stock trades at a high 30.5 times the $1.20 a share FirstService will likely earn this year.
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WYNDHAM WORLDWIDE $77.38 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973- 753-6000; www.wyndhamworldwide.com; Shares outstanding: 116.1 million; Market cap: $8.9 billion; Dividend yield: 2.2%) has now added all of its hotel rooms to the TripAdvisor Instant Booking platform. With Instant Booking, travellers click on the “Book on TripAdvisor” button to set up a reservation.
TripAdvisor is the world’s largest travel site. It reaches over 340 million unique visitors a month and has more than 225 million traveller reviews and opinions. It launched its Instant Booking platform in the U.S. in June 2014 and has since expanded it to the U.K., with other international markets to follow.
Wyndham Worldwide is a hold.
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TripAdvisor is the world’s largest travel site. It reaches over 340 million unique visitors a month and has more than 225 million traveller reviews and opinions. It launched its Instant Booking platform in the U.S. in June 2014 and has since expanded it to the U.K., with other international markets to follow.
Wyndham Worldwide is a hold.
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GOODYEAR TIRE & RUBBER CO. $33.45 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 268.9 million; Market cap: $8.7 billion; Dividend yield: 0.8%) is the world’s largest tire maker, with 52 plants in 22 countries.
In the three months ended September 30, 2015, Goodyear’s revenue fell 10.2%, to $4.18 billion from $4.66 billion a year earlier. The rising U.S. dollar cut the value of the company’s foreign sales (particularly in Europe and Brazil) by $430 million.
Earnings rose 12.0%, to $271.0 million, or $0.99 a share. A year earlier, the company earned $242.0 million, or $0.87 a share.
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In the three months ended September 30, 2015, Goodyear’s revenue fell 10.2%, to $4.18 billion from $4.66 billion a year earlier. The rising U.S. dollar cut the value of the company’s foreign sales (particularly in Europe and Brazil) by $430 million.
Earnings rose 12.0%, to $271.0 million, or $0.99 a share. A year earlier, the company earned $242.0 million, or $0.87 a share.
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DELPHI ENERGY $0.72 (Toronto symbol DEE; TSINetwork Rating: Speculative)(403- 265-6171; www.delphienergy.ca; Shares outstanding: 155.5 million; Market cap: $110.4 million; No dividends paid) develops, produces and explores for oil and natural gas. About 70% of its output is gas; the remaining 30% is oil.
In the three months ended September 30, 2015, Delphi’s production fell 16.6%, to 7,888 barrels of oil equivalent a day from 9,461 a year earlier, after the company sold some fields. The lower output and a 31.4% average decline in oil and gas prices cut cash flow per share to $0.06 from $0.09.
The company will need improved oil and gas prices to move significantly higher, but its long-term outlook is positive.
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In the three months ended September 30, 2015, Delphi’s production fell 16.6%, to 7,888 barrels of oil equivalent a day from 9,461 a year earlier, after the company sold some fields. The lower output and a 31.4% average decline in oil and gas prices cut cash flow per share to $0.06 from $0.09.
The company will need improved oil and gas prices to move significantly higher, but its long-term outlook is positive.
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