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:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
  3. 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
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....
APACHE CORP., $48.97, New York symbol APA, fell 8% after rival oil producer Anadarko Petroleum (New York symbol APC) withdrew its merger offer. Savings from eliminating overlapping functions would have helped the combined firm cope with weak oil prices.

Meanwhile, Apache produced 486,409 barrels of oil equivalent a day in the three months ended September 30, 2015, up 6.8% from 455,295 a year earlier. The gain mainly came from improving efficiency at the company’s international operations, including its offshore wells in the North Sea.

However, lower oil prices resulted in a $0.05-a-share loss, compared to a profit of $1.27 a share a year earlier. Even so, that was much better than the consensus estimate of a $0.36-a-share loss. Revenue dropped 56.5%, to $1.5 billion from $3.4 billion.

OUR RECOMMENDATION: Apache is still a hold.

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AGT FOOD & INGREDIENTS INC., $31.53, symbol AGT on Toronto, buys and processes a range of pulses, which include peas, beans, lentils and chickpeas, as well as other specialty crops. The Saskatchewan-based company owns processing plants in Canada, the U.S., Turkey, Australia, China and South Africa.

Before one-time items, AGT earned $0.51 a share in the three months ended September 30, 2015, up 10.9% from $0.46 a year earlier. Revenue gained 26.1%, to $362.8 million from $287.7 million. The increases came from recent acquisitions and higher processing activity.

AGT continues to benefit from its plan to focus on more-profitable products, such as ingredients and packaged foods, as opposed to simply cleaning, splitting and bagging bulk crops. Food makers use these ingredients in products such as baked goods, soups and beverages, as well as pet food and animal feed.

The stock trades at a low 13.2 times the $2.38 a share AGT will probably earn in 2016. It yields 1.9%.

OUR RECOMMENDATION: AGT Food & Ingredients is a buy.

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VISA INC., $78.75, New York symbol V, set up its European operations (Visa Europe) as an independent firm in 2008. Over 3,700 European banks own this business, which uses Visa’s brand and payment networks under a licensing deal. This week, Visa agreed to buy Visa Europe. Under the deal, it will pay 11.5 billion euros in cash (1 euro = $1.07 U.S.) plus stock worth 5 billion euros. Depending on Visa Europe’s future results, Visa may have to pay an additional 4.7 billion euros at the end of four years. Visa’s balance sheet is strong, so it can comfortably afford this purchase. As of September 30, 2015, it held cash of $3.5 billion and was debt-free....
RUSSEL METALS INC., $19.26, symbol RUS on Toronto, is one of North America’s largest metal distributors, serving 39,000 clients at 53 locations in Canada and 12 in the U.S. In the three months ended September 30, 2015, Russel’s revenue fell 25.5%, to $773.4 million from $1.04 billion a year earlier. The company’s sales mainly declined because revenue fell 40% at its energy products division, which supplies pipes for oil and gas drillers. Earnings dropped sharply, to $12.8 million, or $0.21 a share, from $33.0 million, or $0.54. The latest figure included a $2-million charge related to a more than 7% cut to the company’s workforce. Russel’s earnings fell faster than its revenue because steel prices moved down in the latest quarter. That hurts the company’s profit margins and causes it to suffer losses on its inventory....
APPLE INC., $119.50, Nasdaq symbol AAPL, reported better-than-expected results this week, thanks to strong demand for new models of its iPhone and Mac computers.

In its fiscal 2015 fourth quarter, which ended September 26, 2015, the company sold 48.0 million iPhones, up 22.3% from 39.3 million a year earlier, mainly due to strong demand in China. Even so, that missed the consensus forecast of 48.7 million.

Overall earnings jumped 31.4% to $11.1 billion from $8.5 billion. Per-share profits gained 38.0%, to $1.96 from $1.42, on fewer shares outstanding, beating the consensus estimate of $1.88.

Sales rose 22.3%, to $51.5 billion from $42.1 billion, also exceeding the consensus forecast of $51.1 billion.

In addition to strong demand for the iPhone (63% of total sales), sales of Mac computers (13%) gained 3.9%, while sales of software, music and movies (10%) rose 10.4%. The company bundles its new Apple Watch with other products, like iPods and Beats headphones. Sales in this category (6%) jumped 60.7%.

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WYNDHAM WORLDWIDE CORP., $81.35, symbol WYN on New York, is one of the world’s largest hospitality companies, with 7,700 franchised hotels worldwide. It also manages vacation resorts, rental properties, luxury clubs and time-shares. The company has 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 continues to buy back its stock, including 2.1 million shares for $170 million in the latest quarter. That’s partly why its per-share earnings rose 6.6% before one-time items, to $1.78 from $1.67, beating the consensus estimate of $1.70.

Wyndham’s shares moved up on both the improved results and reports that at least three big Chinese companies are competing to win Beijing’s approval to bid for Starwood Hotels & Resorts Worldwide (symbol HOT on New York). Starwood controls brands like Westin, Sheraton, W Hotels and St. Regis and has more than 1,200 properties worldwide. The company now has a market cap of $13.6 billion.

Earlier this year, China’s Anbang Insurance Group paid nearly $2 billion for the Waldorf-Astoria Hotel on New York’s Park Avenue, a record price for a U.S. hotel. As well, Sunshine Insurance Group, another Chinese insurer, paid $230 million—or more than $2 million a room—for New York’s Baccarat Hotel. That was an all-time high on a per-room basis.

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Visa has shot up 310.5% since we first recommended it at $19 (adjusted for a 4-for-1 share split in March 2015) in our December 2010 issue, but we think it still has plenty of room to rise. The company will continue to benefit as consumers switch from cash to credit and debit cards, and it’s well-positioned to profit from the continued growth of online shopping. Meantime, its popular and well-respected brand is helping it expand in developing countries. VISA INC. $79 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 2.4 billion; Market cap: $189.6 billion; Price-to-sales ratio: 13.9; Dividend yield: 0.7%; TSINetwork Rating: Above Average; www.visa.com) operates the world’s largest electronic payments network, through which it processes credit, debit, prepaid and commercial transactions. The company’s systems can process over 56,000 transactions per second....
ALPHABET INC. (Nasdaq symbols GOOG $713 [class C: non-voting] and GOOGL $737 [class A: one vote per share]; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 680.2 million; Market cap: $491.0 billion; Price-tosales ratio: 6.8; No dividends paid; TSINetwork Rating: Above Average; www.abc.xyz) is the new parent company for Google’s Internet search business (still called Google) and other operations, such as self-driving cars and home thermostats. Each of these subsidiaries will function independently. In the three months ended September 30, 2015, earnings gained 18.7%, to $5.1 billion from $4.3 billion a year earlier. Per-share profits rose 17.6%, to $7.35 from $6.25, on more shares outstanding. Revenue rose 13.0%, to $18.7 billion from $16.5 billion. The number of paid clicks on advertisers’ads rose 23% in the latest quarter, helping offset an 11% drop in the average cost advertisers paid per click. More users are accessing the Internet with mobile devices, but advertisers pay lower rates for mobile ads because they’re harder to see on smaller screens....
Low interest rates are cutting the income these lenders earn on new loans. At the same time, they’ve had to increase the rates they pay out to attract depositors, which has squeezed their margins. In response, they’re making acquisitions and cutting costs. These moves should fuel their earnings, particularly as interest rates will likely rise in 2016. WELLS FARGO & CO. $55 (New York symbol WFC; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 5.1 billion; Market cap: $280.5 billion; Price-to-sales ratio: 3.3; Dividend yield: 2.7%; TSINetwork Rating: Average; www.wellsfargo.com) operates through three divisions: Community Banking provides mortgages, loans, credit cards and other financial services (57% of 2014 revenue, 59% of earnings); Wholesale Banking supplies business loans (27%, 32%); and Wealth, Brokerage and Retirement offers wealth management, brokerage and trust services to individuals and institutions, such as pension plans (16%, 9%)....