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
VERIZON COMMUNICATIONS INC. $46 (New York symbol VZ, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 4.2 billion; Market cap: $193.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.8%; TSINetwork Rating: Average; www.verizon.com) says strong price competition will likely slow its wireless division’s growth, particularly sales of cheaper mobile phones and service plans. Wireless accounts for 70% of Verizon’s revenue. However, the company is doing a good job of getting customers to upgrade from basic cellphones to more profitable smartphones. In addition, demand for its FiOS high-speed fibre optic Internet and TV services continues to improve. Verizon is a buy....
PROCTER & GAMBLE CO. $89 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.7 billion; Market cap: $240.3 billion; Price-to-sales ratio: 3.1; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.pg.com) aims to sell its Germany-based Wella hair care operation, which makes shampoos, dyes and styling products. The company would probably receive $7 billion for Wella, roughly what it paid for it in 2003. This sale is part of Procter’s plan to sell about 100 less-profitable brands. That will leave it with around 80 that together account for 90% of its sales and 95% of its profits. This tighter focus will also cut Procter’s manufacturing and distribution costs....
Toyota and Honda have had to recall thousands of cars in the past few weeks to replace defective airbags made by Takata Corp. That’s because they could deploy too forcefully and injure drivers. However, the recalls are unlikely to hurt the companies’ sales. Both will also keep benefiting from the falling Japanese yen, which makes their overseas sales more valuable. TOYOTA MOTOR CO. ADRs $122 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.7 billion; Market cap: $207.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.toyota.com) is the world’s biggest carmaker by sales....
SONY CORP. ADRs $20 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.2 billion; Market cap: $24.0 billion; Price-to-sales ratio: 0.3; Dividend suspended in September 2014; TSINetwork Rating: Average; www.sony.com) recently lost digital copies of its upcoming movies to online intruders. If the thieves post these films on the Internet, it would likely hurt future sales of both cinema tickets and DVDs. The company also recently announced that it would stop making cheaper mobile phones for emerging markets and focus on higher-priced models for developed nations. Severance costs and other expenses will widen its expected loss to $1.38 per ADR in the year ending March 31, 2015, from $1.21 in 2014. Sony is still a hold....
General Electric and ABB Ltd. (see box) are refocusing on their industrial operations. That positions them to profit as both developed and emerging nations upgrade their power grids. GENERAL ELECTRIC CO. $24 (New York symbol GE; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 10.0 billion; Market cap: $240.0 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.ge.com) recently agreed to form a major new alliance with France’s Alstom SA, a leading maker of electrical-transmission equipment and parts for power plants. Under the deal, GE will form three 50/50 joint ventures with Alstom. One will combine the companies’ electrical grid operations, while a second will focus on products for renewable energy projects, like offshore wind farms. The third will hold Alstom’s nuclear-equipment division....
ABB LTD. ADRs $21 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $48.3 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.abb.com) makes transformers, transmission systems and circuit breakers for power utilities. The Switzerland-based firm also produces automation systems and robotics that its industrial clients use to improve their productivity. In the three months ended September 30, 2014, ABB’s revenue fell 6.8%, to $9.8 billion from $10.5 billion a year earlier. That’s mainly due to slowing demand for transmission gear in Europe. Earnings declined 12.1%, to $734 million from $835 million. ABB continues to buy back shares and recently earmarked $4 billion for future repurchases. Due to fewer shares outstanding, earnings per ADR fell 11.1%, to $0.32 from $0.36 (each American depositary receipt represents one ABB common share). The company aims to improve its profitability by selling non-essential businesses. It’s also turning down riskier, lessprofitable orders. These moves should boost its earnings per ADR from a projected $1.20 in 2014 to $1.41 in 2015. The stock trades at 14.9 times the 2015 forecast. The $0.77 dividend yields 3.7%....
STANLEY BLACK & DECKER INC. $94 (New York symbol SWK; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 156.7 million; Market cap: $14.7 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.2%; TSINetwork Rating: Average; www.stanleyblack anddecker.com) earned $249.1 million in the third quarter of 2014, up 12.7% from $221.1 million a year earlier. Earnings per share rose 11.5% to $1.55 from $1.39, on more shares outstanding. Sales gained 5.2%, to $2.9 billion from $2.8 billion, as Stanley released new tools for consumers and industrial users. It also raised its prices. That offset lower sales of building-security systems, particularly in Europe, and the negative impact of currency exchange rates. Stanley Black & Decker is a buy....
RESTAURANT BRANDS INTERNATIONAL INC. $35 (New York symbol QSR; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 483.3 million; Market cap: $16.9 billion; Priceto- sales ratio: 0.7; Dividend yield: n.a.; TSINetwork Rating: Average; www.rbi.com) is the new company formed by the merger of Tim Hortons Inc. (old symbol THI) and Burger King Worldwide (old symbol BKW). Restaurant Brands is the world’s third-largest fast-food chain, after McDonald’s and Yum Brands, with 14,000 Burger King restaurants and 4,590 Tim Hortons outlets in 100 countries. In all, these locations have annual sales of over $23 billion. Roughly 72% of Tim Hortons shareholders opted to receive 3.0879 shares of the new company for each Tim Hortons share they held. A further 26% chose the default option of $65.50 (Canadian) in cash plus 0.8025 of a Restaurant Brands share, while 2% picked the all-cash option of $88.50 (Canadian) a share....
C.R. BARD INC. $166 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 74.9 million; Market cap: $12.4 billion; Price-to-sales ratio: 3.9; Dividend yield: 0.5%; TSINetwork Rating: Above Average; www. crbard.com) makes over 15,000 medical devices in four main areas: oncology products that detect and treat various types of cancer (28% of 2013 sales); vascular products, like stents and catheters (27%); urology goods, such as drainage and incontinence devices (26%); and surgical tools (16%). Other medical products supply the remaining 3%. The company’s products are typically only used once, so customers must continually buy new ones. Acquisition targets fit well...
BRIGGS & STRATTON CORP. $19 (www.briggsandstratton.com) reported that its sales fell 7.9% in its fiscal 2015 first quarter, which ended September 30, 2014, to $292.6 million from $317.3 million a year earlier. Cool spring and summer weather hurt sales of lawn mowers and garden equipment. That means manufacturers still had a lot of inventory left over, so they ordered fewer of Briggs’ lawn mower engines. However, savings from a restructuring plan narrowed the company’s loss to $0.21 a share from $0.35 a year earlier. Hold. UNITED TECHNOLOGIES CORP. $113 (www.utc.com) expects its revenue to rise from a projected $65 billion in 2014 to between $66 billion and $67 billion in 2015. Strong demand for its building products and Sikorsky helicopters will offset slower growth at its Pratt & Whitney jet-engine division. Earnings will likely gain 4.4%, from $6.80 in 2014 to $7.10 in 2015. The stock trades at 15.9 times the 2015 estimate. Buy.