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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ALLIANT ENERGY CORP. $60 (New York symbol LNT; Income Portfolio, Utilities sector; Shares outstanding: 113.0 million; Market cap: $6.8 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.7%; TSINetwork Rating: Average; www.alliantenergy.com) sells power and natural gas to 1.4 million clients in Wisconsin, Iowa and Minnesota.
Alliant gets just under half of its power from coalburning plants, so it’s in a better position than Ameren (see left) to comply with new air-quality standards. Even so, it plans to spend $10.0 billion on upgrades over the next eight years. This includes converting coal plants to gas and replacing transmission lines.
Warmer weather has also hurt Alliant’s gas and electricity sales. In the first quarter of 2015, revenue fell 5.8%, to $897.4 million from $952.8 million a year earlier. Earnings declined 10.6%, to $96.6 million, or $0.87 a share, from $108.0 million, or $0.97.
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Alliant gets just under half of its power from coalburning plants, so it’s in a better position than Ameren (see left) to comply with new air-quality standards. Even so, it plans to spend $10.0 billion on upgrades over the next eight years. This includes converting coal plants to gas and replacing transmission lines.
Warmer weather has also hurt Alliant’s gas and electricity sales. In the first quarter of 2015, revenue fell 5.8%, to $897.4 million from $952.8 million a year earlier. Earnings declined 10.6%, to $96.6 million, or $0.87 a share, from $108.0 million, or $0.97.
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AMEREN CORP. $40 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 242.6 million; Market cap: $9.7 billion; Price-to-sales ratio: 1.6; Dividend yield: 4.1%; TSINetwork Rating: Average; www.ameren.com) provides power and natural gas to 3.3 million clients in Illinois and Missouri.
In the three months ended March 31, 2015, warmer-than-usual winter weather prompted Ameren’s customers to use less power and gas for heating. That cut its revenue by 2.4%, to $1.56 billion from $1.59 billion a year earlier.
However, the company recently refinanced some debt at lower rates. That reduced its interest charges, boosting earnings by 11.3%, to $108 million, or $0.45 a share, from $97 million, or $0.40.
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In the three months ended March 31, 2015, warmer-than-usual winter weather prompted Ameren’s customers to use less power and gas for heating. That cut its revenue by 2.4%, to $1.56 billion from $1.59 billion a year earlier.
However, the company recently refinanced some debt at lower rates. That reduced its interest charges, boosting earnings by 11.3%, to $108 million, or $0.45 a share, from $97 million, or $0.40.
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KRAFT HEINZ CO. $78 (Nasdaq symbol KHC; Conservative Growth and Income Portfolios, Consumer sector; Shares outstanding: 1.2 billion; Market cap: $93.6 billion; Price-to-sales ratio: n.a.; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.kraftheinzcompany.com) took its current form on July 2, 2015, through the merger of Kraft Foods Group (old Nasdaq symbol KRFT) and H.J. Heinz.
The new firm is North America’s third-largest food and beverage company and the world’s fifth biggest. It will have $29.1 billion of annual revenue, including eight brands with over $1 billion in yearly sales.
The stock trades at a high 27.5 times the $2.84 a share the new firm should earn in 2015. However, that multiple should improve in the next few years as the company starts to see savings from merging plants and combining distribution networks. The $2.20 dividend yields 2.8%.
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The new firm is North America’s third-largest food and beverage company and the world’s fifth biggest. It will have $29.1 billion of annual revenue, including eight brands with over $1 billion in yearly sales.
The stock trades at a high 27.5 times the $2.84 a share the new firm should earn in 2015. However, that multiple should improve in the next few years as the company starts to see savings from merging plants and combining distribution networks. The $2.20 dividend yields 2.8%.
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C.R. BARD INC. $195 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 74.2 million; Market cap: $14.5 billion; Price-to-sales ratio: 4.2; Dividend yield: 0.5%; TSINetwork Rating: Above Average; www.crbard.com) is benefiting from its growth strategy, which involves selling lessprofitable businesses and buying other medical-device makers. A good example is its 2011 purchase of Lutonix, which has developed a drug-coated balloon for treating clogged leg arteries. In the three months ended June 30, 2015, Bard’s earnings rose 7.9%, to $154.3 million from $143.0 million a year earlier.
Per-share profits gained 10.2%, to $2.27 from $2.06. Sales gained 4.0%, to $859.8 million from $827.1 million. Bard gets two-thirds of its sales from customers outside of the U.S. If you exclude the negative impact of currency-exchange rates, its sales rose 8%.
The stock trades at 21.6 times the $9.02 a share Bard will probably earn in 2015. That’s a reasonable multiple for the company, which spends 7% of its revenue on research.
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Per-share profits gained 10.2%, to $2.27 from $2.06. Sales gained 4.0%, to $859.8 million from $827.1 million. Bard gets two-thirds of its sales from customers outside of the U.S. If you exclude the negative impact of currency-exchange rates, its sales rose 8%.
The stock trades at 21.6 times the $9.02 a share Bard will probably earn in 2015. That’s a reasonable multiple for the company, which spends 7% of its revenue on research.
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INTERNATIONAL BUSINESS MACHINES CORP. $161 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 985.0 million; Market cap: $158.6 billion; Price-to-sales ratio: 1.8; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.ibm.com) has developed a new computer chip with four times more transistors than current models by using a silicon-germanium base instead of pure silicon. This innovation will greatly speed up computers while using much less power.
The company has sold most of its chipmaking operations over the past few years, so if this technology becomes commercially viable, IBM will license it to other manufacturers. Faster chips would also make the company’s analytics software perform better.
IBM is a buy.
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The company has sold most of its chipmaking operations over the past few years, so if this technology becomes commercially viable, IBM will license it to other manufacturers. Faster chips would also make the company’s analytics software perform better.
IBM is a buy.
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BAXALTA INC. $31 (New York symbol BXLT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 544.3 million; Market cap: $16.9 billion; Price-to-sales ratio: n.a.; Dividend yield: 0.9%; TSINetwork Rating: Average; www.baxalta.com) makes vaccines and drugs in three main areas: hematology (blood diseases), immunology (immune system) and oncology (cancer).
Before former parent Baxter spun off Baxalta, it bought Germany-based SuppreMol for $225 million. This firm develops drugs for disorders in which the immune system attacks healthy tissue.
Baxter also paid $900 million for the Oncaspar leukemia drug, from Italian pharmaceutical firm Sigma- Tau Finanziaria. Oncaspar has $100 million in annual sales.
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Before former parent Baxter spun off Baxalta, it bought Germany-based SuppreMol for $225 million. This firm develops drugs for disorders in which the immune system attacks healthy tissue.
Baxter also paid $900 million for the Oncaspar leukemia drug, from Italian pharmaceutical firm Sigma- Tau Finanziaria. Oncaspar has $100 million in annual sales.
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BAXTER INTERNATIONAL INC. $39 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 544.3 million; Market cap: $21.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.2%; TSINetwork Rating: Average; www.baxter.com) makes a variety of medical devices, such as intravenous pumps and kidney-dialysis equipment. Hospital products supply 60% of its revenue; the remaining 40% comes from renal (kidney disease) equipment.
On July 1, 2015, the company spun off Baxalta, a maker of vaccines and other drugs. Investors received one Baxalta share as a tax-deferred dividend for every Baxter share they held.
Baxter still owns 19.5% of Baxalta; it plans to sell or distribute these shares within five years. As a separate firm, Baxter expects its research costs to fall from 6% of revenue to less than 5.5%.
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On July 1, 2015, the company spun off Baxalta, a maker of vaccines and other drugs. Investors received one Baxalta share as a tax-deferred dividend for every Baxter share they held.
Baxter still owns 19.5% of Baxalta; it plans to sell or distribute these shares within five years. As a separate firm, Baxter expects its research costs to fall from 6% of revenue to less than 5.5%.
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GANNETT CO., INC. $13 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 114.9 million; Market cap: $1.5 billion; Price-to-sales ratio: n.a.; Dividend yield: 4.9%; TSINetwork Rating: Average; www.gannett.com) publishes daily newspapers in 92 U.S. markets, including its flagship newspaper, USAToday, as well as 19 papers in the U.K. It also has over 200 magazines and other publications.
As a separate firm, Gannett should earn $1.98 a share in 2015, and the stock trades at just 6.6 times that figure. The $0.64 dividend yields 4.9%.
Gannett is still a buy.
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As a separate firm, Gannett should earn $1.98 a share in 2015, and the stock trades at just 6.6 times that figure. The $0.64 dividend yields 4.9%.
Gannett is still a buy.
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TEGNA INC. $29 (New York symbol TGNA; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 226.9 million; Market cap: $6.6 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.9%; TSINetwork Rating: Average; www.tegna.com) owns 46 TV stations, as well as websites that attract over 39 million unique visitors a month.
Gannett spun off its newspaper-publishing operations on June 29, 2015.
Investors received two shares of the new Gannett for each share they held. The rest of the company became Tegna. Investors only become liable for capital gains taxes when they sell.
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Gannett spun off its newspaper-publishing operations on June 29, 2015.
Investors received two shares of the new Gannett for each share they held. The rest of the company became Tegna. Investors only become liable for capital gains taxes when they sell.
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PAYPAL HOLDINGS INC. $38 (Nasdaq symbol PYPL; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $45.6 billion; Price-to-sales ratio: n.a.; No dividends paid; TSINetwork Rating: Above Average; www.paypal.com) processes online transactions, including purchases made through eBay’s auction websites. In the past few years, it has expanded into stores and mobile payments. eBay investors received one PayPal share for each eBay share they held. They only become liable for capital gains taxes when they sell their new shares. Operating as a separate firm will let PayPal pursue alliances with more retailers, cutting its reliance on eBay. At the same time, it continues to invest in its mobile operations, which will help it profit as more people buy goods and pay bills through smartphones.
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