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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Growth Stocks Library Archives
MACY’S INC., $58.19, New York symbol M, operates 885 Macy’s and Bloomingdale’s department stores. It also sells goods online. This week, the company said it would close 35 to 40 of its less profitable Macy’s stores over the next few months. In all, these outlets supply 1% of the company’s sales. It didn’t say how much it expects to pay in severance and other costs. Like most traditional retailers, Macy’s is facing intense competition from online sellers like Amazon.com, which are expanding beyond books and movies to other merchandise such as clothing, shoes and cosmetics. Specialty chains and discount retailers, like Wal-Mart and Target, are also drawing shoppers away from department stores....
CAMPBELL SOUP CO., $47.94, New York symbol CPB, reported better-than-expected earnings this week, thanks to acquisitions and price increases. In its fiscal 2015 fourth quarter, which ended August 2, 2015, the company’s earnings fell 48.8%, to $0.22 a share from $0.43 a year earlier. Without the cost of a restructuring, including management layoffs and eliminating overlapping functions, Campbell’s earnings per share rose 4.9%, to $0.43 from $0.41. That beat the consensus estimate of $0.42. Sales fell 8.6%, to $1.69 billion from $1.85 billion, but that still matched the consensus forecast. If you adjust for the negative impact of currency rates, acquisitions of new businesses and an extra week in the year-earlier quarter, sales rose 1%. That’s partly because Campbell is giving fewer discounts to retailers....
ALIMENTATION COUCHE-TARD INC., $59.94, symbol ATD.B on Toronto, hit a new all-time high this week after reporting improved profits in the latest quarter. Couche-Tard operates 7,987 convenience stores throughout North America. The Canadian outlets operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. In Europe, the company operates 2,229 stores across Scandinavia (Norway, Sweden and Denmark), Poland, the Baltic states (Estonia, Latvia and Lithuania) and Russia....
NEW GOLD INC., $3.00, symbol NGD on Toronto, has four mines: Mesquite in the U.S., Cerro San Pedro in Mexico, the Peak mine in Australia and the New Afton mine in B.C. The company also owns 30% of the El Morro copper/gold project in Chile, 100% of the Blackwater property in B.C. and 100% of Ontario’s Rainy River project. New Gold has just agreed to sell its El Morro stake to Goldcorp (Toronto symbol G) for $90 million in cash, 4% of El Morro’s gold production when a mine is built, and the cancellation of a $93-million loan from Goldcorp....
BHP BILLITON LTD. ADRs, $36.69, New York symbol BHP, recently set up its aluminum, manganese, nickel and silver operations, as well as some coal mines, as a new firm called South32. The spinoff leaves BHP focused on four main commodities: iron ore, metallurgical coal, copper and petroleum, at properties in Australia, North America and South America. In its 2015 fiscal year, which ended June 30, 2015, BHP’s revenue fell 21.4%, to $44.6 billion from $56.8 billion in 2014. Earnings dropped 51.6%, to $6.4 billion, or $2.41 per ADR (each American depositary receipt represents two BHP common shares). In 2014, it earned $13.3 billion, or $4.99 per ADR....
3M has made a number of acquisitions in the past few years. Expanding this way is riskier than internal growth, as the buyer of something rarely knows as much about it as the seller. Hidden problems can lead to big writedowns, as Microsoft found out with its recent purchase of Nokia’s mobile phone operations (see page 88). However, 3M’s recent purchases of companies that make medical supplies and safety equipment help offset the cyclical nature of its main businesses. Moreover, 3M is a leader in most of its markets. That means it can charge higher prices, particularly for new products that face little competition. 3M COMPANY $143 (New York symbol MMM; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 624.8 million; Market cap: $89.3 billion; Price-to-sales ratio: 2.8; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.3m.com) started up in 1902, when it was called the Minnesota Mining & Manufacturing Company....
MONSANTO CO. $97 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 467.8 million; Market cap: $45.4 billion; Price-tosales ratio: 2.7; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.monsanto.com) has dropped its takeover offer for Switzerland-based rival Syngenta AG, the world’s largest maker of pesticides, herbicides and other agricultural chemicals. A merger would have let Monsanto and Syngenta jointly develop new genetically modified seeds for corn, soybeans and other crops. Syngenta’s expertise would also improve Monsanto’s pesticide products. In addition, the new firm could cut costs and improve its efficiency by combining distribution networks. Monsanto recently increased its bid by 5%, to $47 billion in cash and shares....
Spinoffs are a great way for companies to unlock hidden value, as the former parent and newly independent firm tend to outperform groups of comparable stocks for several years. But in the cases of Agilent and NCR, we prefer the parent companies to their former subsidiaries for new buying. AGILENT TECHNOLOGIES INC. $36 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 332.0 million; Market cap: $12.0 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.1%; TSINetwork Rating: Average; www.agilent.com) split into two publicly traded firms on November 1, 2014. One company kept the Agilent name and stock symbol and focuses on testing equipment for medical research labs. The other firm, called Keysight Technologies (see right), makes testing systems for electronics....
NORDSTROM INC. $74 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 188.2 million; Market cap: $13.9 billion; Price-to-sales ratio: 1.0; Dividend yield: 2.0%; TSINetwork Rating: Average; www.nordstrom.com) owns and operates 304 stores in the U.S. and Canada that mainly sell upscale clothing, accessories and footwear. In its fiscal 2016 second quarter, which ended August 1, 2015, sales rose 9.1%, to $3.7 billion from $3.4 billion a year earlier. Same-store sales (which exclude contributions from new outlets) rose 4.9%. Earnings gained 14.7%, to $1.09 a share from $0.95. Toronto-Dominion Bank (Toronto symbol TD) recently agreed to buy the company’s credit card loans for $1.8 billion. Nordstrom will probably use these funds to pay down its total debt of $3.1 billion....
PHILIPS ELECTRONICS N.V. ADRs $25 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 925.3 million; Market cap: $23.1 billion; Priceto- sales ratio: 0.9; Dividend yield: 3.5%; TSINetwork Rating: Average; www.philips.com) will soon close the $2.9-billion sale of 80.1% of its light emitting diode (LED) components and automotive-lighting division. The buyer is private equity firm GO Scale Capital. The deal excludes Philips’s lighting-solutions operations, which design and build LED systems for large-scale uses. The company plans to spin this business off as a separate firm. After the spinoff, Philips will focus on medical equipment and consumer goods. Philips is a buy.