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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Growth Stocks Library Archives
TOROMONT INDUSTRIES LTD. $31.62 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 77.9 million; Market cap: $2.4 billion; Dividend yield: 2.2%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division. In the three months ended September 30, 2015, Toromont’s sales rose 8.2%, to $505.6 million from $467.4 million a year earlier. Earnings per share 11.5%, to $0.58 from $0.52. Toromont saw stronger demand from customers in construction and agriculture than a year ago, which offset continued weak mining sales. It also cut costs. The company’s financial position is strong: it holds cash of $97.4 million, or $1.25 a share, and its $303.7 million of debt represents just 12.7% of its market cap. Toromont raised its quarterly dividend by 13.3% with the April 2015 payment, to $0.17 a share from $0.15. The stock now yields 2.2%. Toromont has raised its payout every year for 26 years....
BMTC GROUP $13.70 (Toronto symbol GBT; TSINetwork Rating: Extra Risk) (514-648-5757; No website; Shares outstanding: 37.9 million; Market cap: $519.4 million; Dividend yield: 1.8%) had sales of $189.4 million in the three months ended September 30, 2015, down slightly from $190.2 million a year earlier. Earnings fell 28.6%, to $13.0 million, or $0.31 a share, from $18.3 million, or $0.40 a share. BMTC spent more on marketing, renovations and enhancing its store websites in the latest quarter. The company’s website and store improvements are a big part of its growth plans. However, the cost of these upgrades—$25.6 million—will keep weighing on its earnings for the next year or two....
CALIAN TECHNOLOGIES $16.50 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 7.4 million; Market cap: $121.7 million; Dividend yield: 6.8%) has won two more contracts for emergency response preparedness training, a new area for the company. These deals build on the first deal it signed, with Bruce Power, earlier this year. No terms were disclosed. Under one of these new contracts, Calian will help Emergency Management British Columbia design, develop, conduct and evaluate an exercise in support of the province’s new Earthquake Immediate Response Plan....
EXTENDICARE INC. $9.30 (Toronto symbol EXE; TSINetwork Rating: Extra Risk) (905-470-5534; www.extendicare.com; Shares outstanding: 87.8 million; Market cap: $798.3 million; Dividend yield: 5.2%) has called a special shareholder meeting for March 8, 2016. The move is in response to a formal request from its largest investor, Toronto-based investment firm Oxford Park Group. In July 2015, Oxford Park acquired 5% of Extendicare, with the intention of pushing the company to enhance shareholder value. As part of that plan, Oxford Park wants to replace seven of Extendicare’s nine directors with its own nominees. It also believes the company’s move into retirement homes from its main business of chronic- and longterm care facilities has added unnecessary risk. Moreover, Oxford Park wants Extendicare to buy back up to $50 million worth of its shares, cut costs to boost its profit margins and tie more of its directors’ and executives’ pay to the company’s performance....
AIMIA INC. $9.39 (Toronto symbol AIM; TSINetwork Rating: Extra Risk) (514-897-6800; www.aimia.com; Shares outstanding: 157.8 million; Market cap: $1.4 billion; Dividend yield: 8.1%) owns and operates Aeroplan, Canada’s largest loyalty program, plus other loyalty plans in the U.K, the Middle East, Italy and Mexico. In the three months ended September 30, 2015, Aimia’s revenue fell 2.6%, to $529.3 million from $543.4 million a year earlier. The company’s earnings per share declined 22.2%, to $0.14 from $0.18. Weaker economic conditions in Canada and Europe cut consumer spending, which meant less use of credit cards and Aeroplan miles. Aimia now plans to cut costs by closing offices and laying off 200 of its 4,000 employees. It will also look at selling non-essential assets, such as its analytics division or Club Premier in Mexico....
WYNDHAM WORLDWIDE $74.20 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973- 753-6000; www.wyndhamworldwide.com; Shares outstanding: 116.1 million; Market cap: $8.5 billion; Dividend yield: 2.3%) is one of the world’s largest hospitality companies, with 7,700 franchised hotels worldwide. Wyndham also manages vacation resorts, rental properties, luxury clubs and time-shares. It currently has around 110,000 vacation-rental properties in 100 countries. In the three months ended September 30, 2015, Wyndham’s revenue rose 3.3%, to $1.56 billion from $1.51 billion a year earlier. The company gets most of its revenue from vacation rather than business travel, and vacation bookings rose in the latest quarter. That helped increase its occupancy rate by 1.7%....
It pays to be wary of companies that use acquisitions to expand instead of internal growth. This strategy can work well at times, but one bad takeover can wipe out gains from a dozen good ones. Stanley Black & Decker is a good example of a company that grows by acquisition without taking on excessive risk. That’s because it has a long history of successfully merging new businesses and boosting their profits. That cuts the risk of a large writedown. Even though the stock has doubled since Stanley bought Black & Decker in 2010, we feel it still has plenty of gains ahead....
NEWELL RUBBERMAID INC. $45 (New York symbol NWL; Aggressive Growth and Income Portfolios, Consumer sector; Shares outstanding: 267.1 million; Market cap: $12.0 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.7%; TSINetwork Rating: Average; www.newellrubbermaid.com) is buying Jarden Corp. (New York symbol JAH), which makes a wide variety of consumer products, including Sunbeam kitchen appliances, Mr. Coffee coffee makers, Ball jars, Crock-Pot cookers and Rawlings baseball mitts. Jarden shareholders will receive $21.00 a share in cash plus 0.862 of a Newell common share. The offer is worth a total of $13.2 billion. Shares of Jarden are trading at 3.7% below the offer’s value, which indicates investors do not expect a higher bid. Newell expects to complete the deal in the second quarter of 2016....
The outlook for oil and other commodities remains weak, but we still feel that most investors should devote 10% to 15% of their portfolios to resource stocks. But only buy these or any stocks if you are prepared to hold them for at least the next several years. To further cut your risk, you should focus on companies with high-quality reserves, like the three we analyze below. All three are also reducing their costs, which puts them in a better position to profit when prices recover. However, not all of them are buys right now. CHEVRON CORP. $93 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $176.7 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.6%; TSINetwork Rating: Average; www.chevron.com) produced an average of 2.54 million barrels of oil a day (including natural gas) in the three months ended September 30, 2015. That’s down 1.1% from 2.57 million barrels a day a year earlier....
NCR CORP. $27 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 169.9 million; Market cap: $4.6 billion; Price-to-sales ratio: 0.7; No dividends paid; TSINetwork Rating: Average; www.ncr.com) makes automated teller machines, cash registers, self-serve checkouts and kiosks for theatres and arenas. Private equity firm Blackstone Group (New York symbol BX) recently purchased $820 million worth of preferred shares that can be converted to common shares at $30.00 each. If Blackstone converted all of these holdings, it would own 17% of NCR. Blackstone’s expertise should help NCR expand its software and services businesses, which are more profitable than making ATMs and other equipment. Meanwhile, the company will use the cash to buy back $1.0 billion worth of its common shares through a Dutch auction process. Based on the initial response to the offer, NCR will repurchase 37.4 million shares at $26.75 each. That will cut the number of shares outstanding by 22%....