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
BROADRIDGE FINANCIAL SOLUTIONS $46.55 (New York symbol BR; TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 120.0 million; Market cap: $5.6 billion; Dividend yield: 2.3%) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 90% of all proxy votes in the U.S. and Canada. Without one-time items, Broadridge earned $37.0 million, or $0.30 a share, in its fiscal 2015 first quarter, which ended September 30, 2014. That’s down 22.9% from $48.0 million, or $0.39 a share, a year earlier. The company paid employees higher commissions on new sales and performance bonuses. It also expanded its sales and marketing capabilities. Broadridge typically makes about half of its profits in its fiscal fourth-quarter ended June 30. That’s the busiest period for processing proxies and annual reports for its clients....
ATLANTIC TELE-NETWORK $65.04 (Nasdaq symbol ATNI; TSINetwork Rating: Speculative) (340-777-8000; www.atni.com; Shares outstanding: 15.9 million; Market cap: $1.0 billion; Dividend yield: 1.8%) is entering the solar energy market by acquiring 28 solar projects in Massachusetts, California and New Jersey for $103 million. Atlantic will now operate the assets, which have 45.7 megawatts of capacity, through its newly created Ahana Renewable subsidiary. The projects’ power-purchase agreements range from 10 to 25 years. Before the purchase, Atlantic held cash of $395.6 million, or $24.87 a share, so it can easily afford this acquisition....
The near-term direction of oil and gas prices remains uncertain, so we think the best way to cut risk is to look for companies with rising production that are trading at reasonable multiples to cash flow. Here are two with sound long-term prospects. DEVON ENERGY CORP. $61.60 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 409.1 million; Market cap: $24.4 billion; Dividend yield: 1.6%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 46% gas and 54% oil. The company narrowed its focus with its July 2014 sale of some of its properties to Linn Energy for $2.3 billion. The deal included Devon’s holdings in the Rockies, the onshore Gulf Coast and the Mid- Continent region (which includes Oklahoma, Kansas and Texas)....
SASOL LTD. (ADR) $34.47 (New York symbol SSL; TSINetwork Rating: Extra Risk) (082- 883-9697; www.sasol.com; ADRs outstanding: 650.8 million; Market cap: $22.5 billion; Dividend yield: 7.1%) has announced that it will proceed with building an $8.1-billion facility in Lake Charles, Louisiana that will convert natural gas into plastics and other products. The project, which will triple Sasol’s U.S. chemical production, will start up in 2018. Major developments like this can add a lot of risk. But the plant will take advantage of cheap and abundant U.S. shale gas, as well as ethane-shipping infrastructure that’s already in place on the U.S. Gulf Coast. Expanding in the U.S. will also help Sasol offset some of the political and currency risks of operating mainly in South Africa....
STANTEC INC. $30.05 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 93.8 million; Market cap: $2.8 billion; Dividend yield: 1.2%) (all figures adjusted for a 2-for-1 share split in November 2014) sells a range of consulting, project-delivery, design and technology services. The company’s clients operate in a variety of industries, including oil and gas, transportation and construction. In the quarter ended September 30, 2014, Stantec’s revenue rose 12.2%, to $544.2 million from $484.8 million a year earlier. Earnings gained 5.7%, to $48.6 million, or $1.04 a share, from $46.0 million, or $0.99. Stantec continues to grow by acquisition. It has now completed its purchase of Montreal-based Dessau, a distressed firm that’s one of a number of companies caught up in a Quebec government inquiry into corruption in the construction industry. Under the deal, Stantec won’t be responsible for any of the millions of dollars in fines or penalties Dessau may have to pay....
GOODYEAR TIRE & RUBBER CO. $25.57 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 274.6 million; Market cap: $6.8 billion; Dividend yield: 0.9%) expects to report lowerthan- expected profits in its soon-to-bereleased 2014 fourth-quarter results. The company now expects fourth-quarter operating income growth to be below the 10% to 15% it originally forecast in October 2014. That’s because weak European sales and a decline in foreign currencies against the U.S. dollar are hurting the value of its international sales. Warmer-than-expected weather also hurt demand for winter tires. However, Goodyear reaffirmed its 2015 targets and expects operating income growth of 10% to 15% to resume this year. The stock trades at just 8.1 times the company’s forecast 2015 earnings of $3.15 a share....
WESTJET AIRLINES $32.05 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 127.8 million; Market cap: $4.1 billion; Dividend yield: 1.5%) serves 91 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 109 modern Boeing 737s are 30% more fuel efficient than older jets. In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 14 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers. In the three months ended September 30, 2014, WestJet’s earnings, excluding one-time items, jumped 30.9%, to a third-quarter record of $85.4 million from $65.1 million a year earlier. Earnings per share gained 32.0%, to $0.66 from $0.50, on fewer shares outstanding. This was WestJet’s 38th consecutive quarter of profitability. Revenue rose 9.2%, to $1.0 billion from $924.8 million....
AEROPOSTALE INC. $2.78 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 79.1 million; Market cap: $220.0 million; No dividends paid) has risen over 20% since the clothing retailer said in early January 2015 that it expects to report a much smaller than expected loss in its 2014 fourth quarter. The company now expects a fourthquarter loss of $0.25 to $0.31 share, compared to its earlier forecast of a $0.44-ashare loss. It has been cutting costs and selling more high-profit-margin clothing. Aeropostale continues to face intense competition from other teen-clothing retailers. To restore its profitability, it plans to better market its products and keep cutting costs and refreshing its clothing lines. It’s also closing underperforming stores....
CARFINCO FINANCIAL $8.80 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888-486-4356; www.carfinco.com; Shares outstanding: 26.5 million; Market cap: $232.9 million; Dividend yield: 3.4%) is down sharply since mid-January from $11.25 to today’s price. The company provides car loans to consumers who don’t meet the criteria of traditional lenders, like banks. In November 2014, Carfinco’s shareholders voted to accept a friendly $11.25-a-share takeover bid from Spain’s Banco Santander SA (ADR symbol SAN on New York). The company’s directors and executive officers, who collectively own a 12.9% stake, also agreed to support the sale. But neither Carfinco nor Santander have announced anything about the $268-million deal, which was expected to close by the end of 2014 or early this year. Santander has been in the news lately with the appointment of a new executive chairman, a share issue to raise 7.5 billion euros ($10.4 billion Canadian) to shore up its capital base and a dividend cut....
CHIPOTLE MEXICAN GRILL $703.89 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 31.0 million; Market cap: $21.8 billion; No dividends paid) halted sales of pork items at one-third of its nearly 1,800 U.S. restaurants in mid-January 2015. That’s because it learned that a key supplier had failed to meet Chipotle’s humane pig-housing standards. The company uses pork in around 7% of the burritos, tacos, bowls and salads it sells. Chipotle believes most customers will simply substitute pork with other meats on the menu, but some may go elsewhere....