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
RESTAURANT BRANDS INTERNATIONAL INC. $43 (New York symbol QSR; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 467.1 million; Market cap: $20.1 billion; Price-to-sales ratio: 14.2; Dividend yield: 0.8%.; TSINetwork Rating: Average; www.rbi.com) took its current form on December 12, 2014, as a result of Burger King Worldwide’s (old symbol BKW) takeover of Tim Hortons Inc. (old symbol THI). Restaurant Brands now has 14,372 Burger King restaurants and 4,671 Tim Hortons outlets in over 100 countries. In the three months ended December 31, 2014, the company lost $514.2 million, or $2.52 a share, compared to a profit of $66.8 million, or $0.19, a year earlier. Without merger-related costs and other unusual items, gross earnings before depreciation, interest and taxes gained 23.1%....
All three of the companies we analyze below provide vital services to banks, credit card issuers and other financial services firms. They’re also benefiting as the improving economy spurs loan demand, prompting their clients to buy more of their products. What’s more, they all dominate their niche businesses, which makes it harder for new competitors to steal their customers. Thanks to these factors, all three are trading near their all-time highs. But only two are buys right now....
VISA INC. $273 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 616.0 million; Market cap: $168.2 billion; Price-to-sales ratio: 13.2; 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. In its fiscal 2015 first quarter, which ended December 31, 2014, Visa’s earnings rose 11.5%, to $1.6 billion from $1.4 billion a year earlier. Per-share earnings gained 15.0%, to $2.53 from $2.20, on fewer shares outstanding. Revenue rose 7.2%, to $3.4 billion from $3.2 billion. The company gets half of its revenue from outside the U.S. Without the negative impact of currency exchange rates, revenue gained 9%. Visa processed 17.6 billion transactions in the quarter, up 10.1% from a year earlier....
T. ROWE PRICE GROUP INC. $84 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 260.7 million; Market cap: $21.9 billion; Price-to-sales ratio: 5.5; Dividend yield: 2.5%; TSINetwork Rating: Average; www.troweprice .com) sells mutual funds and wealth management services. In 2014, the company earned $1.23 billion, or $4.55 a share. That’s up 17.4% from $1.05 billion, or $3.90 a share, in 2013. Revenue gained 14.3%, to $4.0 billion from $3.5 billion. On December 31, 2014, the company had a record $746.8 billion of assets under management, up 7.9% from $692.4 billion at the end of 2013. About 93% of that increase came from higher stock prices. The company’s fee income varies with the value of the assets it manages, so it gains from rising stock markets. Higher mutual fund sales (net of redemptions) supplied the remaining 7%....
These two alcoholic-beverage makers have been increasing their international sales. That has added currency risk, but their top brands will keep fuelling their growth. Still, only one is a buy right now. DIAGEO PLC ADRs $118 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 627.8 million; Market cap: $74.1 billion; Price-to-sales ratio: 4.7; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.diageo.com) is the world’s largest premium alcoholic beverage company. Its major brands include Guinness stout, Smirnoff vodka, Johnnie Walker whisky and Captain Morgan rum. The company recently agreed to acquire the 50% of Don Julio tequila that it doesn’t already own from Casa Cuervo in exchange for its Bushmills Irish whisky business. Diageo will also get $408 million when it completes the deal later this year....
L BRANDS INC. $92 (New York symbol LB; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 292.7 million; Market cap: $26.9 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.2%; TSINetwork Rating: Average; www.lb.com) reported that its same-store sales rose 6% in its 2015 fourth quarter, which ended January 31, 2015, thanks to gains at Victoria’s Secret (up 10%) and Bath & Body Works (up 6%). The retailer has also increased its dividend by 47.1%. The new annual rate of $2.00 a share yields 2.2%. It is also paying a special dividend of $2.00 a share. However, the stock trades at a high 25.9 times L Brands’likely fiscal 2016 earnings of $3.55 a share. L Brands is a hold....
Low interest rates have spurred strong investor interest in these two high-yielding master limited partnerships (MLPs). Both have strong businesses that give them lots of cash flow for distributions. However, we feel Cedar Fair (see box) is the better choice, because Buckeye’s aggressive growth-by-acquisition strategy adds risk. Still, there are a few things Canadian investors should keep in mind: for one, you must pay a 35% U.S. withholding tax on income from MLPs, though you can usually claim a non-refundable Canadian tax credit to offset that. As well, MLPs are not suitable for RRSPs or RRIFs....
CEDAR FAIR L.P. $56 (New York symbol FUN; Income Portfolio, Consumer sector; Units outstanding: 55.9 million; Market cap: $3.1 billion; Price-to-sales ratio: 2.8; Dividend yield: 5.4%; TSINetwork Rating: Average; www.cedarfair.com) owns 11 amusement parks, three outdoor water parks, one indoor water park and five hotels. Cedar Fair reported record revenue of $1.16 billion in 2014, up 2.2% from $1.13 billion in 2013. If you exclude the sale of a water park in 2013, attendance was flat. However, spending per guest rose 3%, while out-of-park spending (hotels adjacent to its parks) gained 2%. Higher labour costs and spending on new attractions cut its earnings by 4.1%, to $1.86 a unit from $1.94. The partnership recently raised its quarterly distribution by 7.1%, to $0.75 from $0.70. The new annual rate of $3.00 yields 5.4%....
PFIZER INC. $35 (New York symbol PFE; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 6.3 billion; Market cap: $220.5 billion; Price-to-sales ratio: 4.4; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.pfizer.com) has received approval from the U.S. Food and Drug Administration for new breast cancer drug palbociclib. Pfizer will market this treatment under the Ibrance brand. Ibrance will probably contribute $4 billion to the company’s annual revenue by 2020; last year, Pfizer’s revenue was $49.6 billion. The company spends a high 17% of its revenue on research. This hurts its short-term earnings but lets it develop innovative drugs like Ibrance. New treatments like these help Pfizer offset sales of other drugs that have lost their patent protection, like Lipitor (cholesterol) and Celebrex (arthritis)....
MOTOROLA SOLUTIONS INC. $68 (New York symbol MSI; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 219.8 million; Market cap: $14.9 billion; Priceto- sales ratio: 2.5; Dividend yield: 2.0%; TSINetwork Rating: Average; www.motorolasolutions.com) recently sold its enterprise division for $3.45 billion. This business makes a variety of electronics, such as bar-code scanners and kiosks, for corporate clients. The company now focuses on specialized communications equipment, such as radios for police and fire vehicles. Its sales fell 5.6%, to $5.9 billion in 2014 from $6.2 billion in 2013, due to weaker demand in North America and Asia. Earnings per share dropped 33.2%, to $2.58 from $3.86. The stock has risen recently on speculation that Motorola Solutions is considering selling itself. However, it could drop suddenly if a suitable offer fails to materialize....