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
TIM HORTONS INC., $80.44, New York symbol THI, jumped 27% this week after agreeing to a friendly takeover offer from Miami-based Burger King Worldwide (New York symbol BKW). The combined firm would be the world’s third-largest fast-food operator, after McDonald’s and Yum Brands, with annual sales of $23 billion U.S. and 18,000 restaurants in over 100 countries. Canada will supply 67% of the merged company’s revenue, followed by the U.S. (20%) and other countries (13%). The Tim Hortons and Burger King chains will operate independently but will probably share some back office and distribution networks. Tim Hortons can also use Burger King’s expertise to expand in the U.S. and other countries....
TIM HORTONS INC., $87.40, symbol THI on Toronto, jumped 27% this week after agreeing to a friendly takeover offer from Miami-based Burger King Worldwide (New York symbol BKW). The combined firm would be the world’s third-largest fast-food operator, after McDonald’s and Yum Brands, with annual sales of $23 billion U.S. and 18,000 restaurants in over 100 countries. Canada will supply 67% of the merged company’s revenue, followed by the U.S. (20%) and other countries (13%). The Tim Hortons and Burger King chains will operate independently but will probably share some back office and distribution networks. Tim Hortons can also use Burger King’s expertise to expand in the U.S. and other countries....
As demand for traditional phone service declines, AT&T is shifting into faster-growing fields like wireless and fibre optic TV. On the surface, the company’s recent deal to buy satellite TV provider DirecTV doesn’t seem to fit with that plan. That’s because strong competition from cable operators and online streaming has hurt satellite demand in the past few years. However, DirecTV will let AT&T expand its wireless and highspeed Internet services to rural users. It will also give it a platform to expand in Latin America. Moreover, an increased number of TV subscribers will help AT&T negotiate better deals for TV shows, particularly profitable sports programming like NFL football....
TIM HORTONS INC. $80 (New York symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 132.8 million; Market cap: $10.6 billion; Price-to-sales ratio: 3.8; Dividend yield: 1.5%; TSINetwork Rating: Average; www.timhortons.com) became a wholly owned subsidiary of the Wendy’s hamburger chain in 1995. Under pressure from activist investors, Wendy’s spun off Tims as a separate company in 2006. The stock is up 183% since the spinoff, partly because Tims has just accepted a friendly takeover offer from Miami-based Burger King Worldwide Inc. (New York symbol BKW). Tims shareholders can opt to take $88.50 (Canadian) a share in cash, or 3.0879 shares of Burger King (worth $93.72 U.S.). However, Burger King plans to limit the overall cash payout, so most Tims investors will get $65.50 (Canadian) in cash plus 0.8025 of a share (for a total of $84.69 U.S.)....
Oil prices have held steady at around $100 a barrel, even as the U.S. shale boom has increased that country’s production by 70% in the past five years. That’s mainly due to fears that unrest in the Middle East and Ukraine could threaten world oil supplies. We feel the best way to invest in the cyclical oil and gas industry is through well-established producers like these four. Their high-quality operations give them plenty of cash flow to replenish their reserves and pay for share buybacks and dividends. However, not all are buys right now. CHEVRON CORP. $129 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $245.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.chevron.com) is the second-largest integrated oil company in the U.S. by revenue, after ExxonMobil (New York symbol XOM)....
ALCOA INC. $17 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.2 billion; Market cap: $20.4 billion; Price-to-sales ratio: 1.7; Dividend yield: 0.7%; TSINetwork Rating: Average; www.alcoa.com) continues to close older, inefficient smelters in response to weak aluminum prices. The company now plans to shut down its Portovesme smelter in Italy, which will cut Alcoa’s global smelting capacity by 4%. Severance payments and other costs will cut the company’s earnings by around $0.15 a share in the third quarter of 2014. To put that in context, Alcoa earned $0.18 a share before one-time items in the second quarter....
C.R. BARD INC. $149 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 74.6 million; Market cap: $11.1 billion; Price-to-sales ratio: 3.7; Dividend yield: 0.6%; TSINetwork Rating: Above Average; www.crbard.comtarget="_blank”) continues to develop successful new medical devices. For example, it should soon receive approval to start selling a catheter that uses a drug-coated balloon to treat clogged arteries. Products like this are helping Bard offset the 2.3% tax it has to pay on certain medical devices it sells in the U.S. under Obamacare. In the second quarter of 2014, Bard’s earnings rose 22.0%, to $160.7 million from $131.7 million a year earlier. Earnings per share gained 29.6%, to $2.06 from $1.59. Revenue rose 8.8%, to $827.1 million from $759.9 million. Bard spends around 10% of its revenue on research. The company recently increased its quarterly dividend by 4.8%, to $0.22 a share from $0.21. The stock has gained 30% in the past year, so the new annual rate of $0.88 yields just 0.6%....
BRIGGS & STRATTON CORP. $20 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 46.7 million; Market cap: $934.0 million; Priceto-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is buying Allmand Bros., a privately held Nebraska firm that makes portable lighting products and heaters for construction companies and other industrial users. The purchase will cut Briggs’reliance on weather-dependent products, like lawn mower engines and snow blowers. The company will pay $62 million for Allmand when it completes the purchase in the next few weeks. The acquisition will add $80 million to Briggs’annual sales. To put these figures in context, the company’s sales fell 0.2% in its 2014 fiscal year, which ended June 30, 2014, to $1.859 billion from $1.862 billion in fiscal 2013. The lack of major storms in 2014 hurt sales of portable power generators. Overall earnings declined 13.4%, to $39.0 million from $45.1 million. Per-share earnings fell 11.8%, to $0.82 from $0.93, on fewer shares outstanding....
These two chipmakers continue to dominate their niche markets. We prefer Texas Instruments over Nvidia, as its wider variety of products and customers cuts its risk. TEXAS INSTRUMENTS INC. $48 (Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $52.8 billion; Price-to-sales ratio: 4.2; Dividend yield: 2.5%; TSINetwork Rating: Average; www.ti.com) used to focus on chips for cellphones, but has shifted to analog chips, which convert inputs like touch, sound and pressure into electronic signals that computers can understand. Manufacturers use these chips in a variety of products, including cars, medical devices and appliances. In the quarter ended June 30, 2014, the company’s earnings rose 3.5%, to $683 million from $660 million a year earlier. Texas Instruments spent $743 million on share buybacks during the quarter. As a result, earnings per share gained 6.9%, to $0.62 from $0.58....
DIAGEO PLC ADRs $119 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 628.1 million; Market cap: $74.7 billion; Price-to-sales ratio: 4.4; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.diageo.com) reported that its sales fell 9.2% in its 2014 fiscal year, which ended June 30, 2014, to 10.3 billion British pounds from 11.3 billion in fiscal 2013 (1 pound=$1.80 Canadian). That’s mainly due to unfavourable currency exchange rates. Earnings per ADR declined 7.3%, to 3.82 pounds from 4.12 (each ADR represents four common shares). The company recently increased its stake in United Spirits, India’s largest alcoholic-beverage maker, to 54.78% from 28.78%. That should push up Diageo’s fiscal 2015 earnings to 4.64 poundsper ADR. The stock trades at 15.5 times that forecast. However, exchange rate volatility could continue to weigh on the stock price. Diageo is still a hold.