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
MITEL NETWORKS, $10.80, symbol MNW on Toronto, has reported its second quarter of results that include Aastra Technologies, a Stock Pickers Digest recommendation Mitel acquired in a friendly takeover on January 31, 2014. Aastra shareholders received cash and Mitel shares. During the quarter, Mitel’s revenue rose 96.9%, to $288.7 million from $146.6 million a year ago (all figures except share price in U.S. dollars). Most of the increase came from Aastra. Excluding one-time items, earnings jumped 124.2%, to $22.2 million from $9.9 million. However, earnings per share rose just 16.7%, to $0.21 from $0.18, as the company issued new shares to pay for Aastra. Aastra develops and markets products and systems for accessing communication networks, including the Internet. Its technology is centred on business telephone systems and includes products that integrate land lines and mobile phones....
GANNETT CO., INC., $33.61, New York symbol GCI, rose 2% this week after announcing that it would spin off its publishing operations as a separate firm. The new company will keep the Gannett name and publish its flagship newspaper, USAToday, as well as 81 U.S. daily newspapers and 17 papers in the U.K. It also has over 200 magazines and other publications. In the latest quarter, these operations supplied 59% of Gannett’s revenue and 20% of its earnings. The still-unnamed remaining company (41% of revenue and 80% of earnings) will focus on Gannett’s 46 TV stations as well as its numerous Internet sites....
IMPERIAL METALS CORP., $10.36, symbol III on Toronto, fell 38% this week after a dam broke at a tailings pond at the company’s Mount Polley gold/copper mine in B.C. The breach spilled an estimated 10 million cubic metres of wastewater and 4.5 million cubic meters of fine sand into nearby waterways. The extent of the damage to local lakes and rivers is unknown at this point, but the company will now submit an environmental impact assessment and cleanup plans to the B.C. Ministry of Environment. Estimates of the total liability for the cleanup are in the range of $225 million, or $3 per Imperial share....
NEWELL RUBBERMAID INC., $32.45, New York symbol NWL, makes a variety of everyday items, such as trash cans and food-storage containers. Aside from Rubbermaid, its main brands include Sharpie, Paper Mate, Waterman and Levolor. The company recently agreed to buy Ignite Holdings, a private firm that makes reusable water bottles and thermal mugs under the Contigo and Avex brands. Newell will pay $308 million when it completes the purchase later this year. Newell feels its expertise will cut Ignite’s manufacturing costs. It can also use its extensive global distribution networks to increase Ignite’s annual sales of $125 million....
ATLANTIC TELE-NETWORK, $58.88, symbol ATNI on Nasdaq, jumped over 8% this week after reporting stronger quarterly results. In the three months ended June 30, 2014, Atlantic’s revenue rose 16.3%, to $83.3 million from $71.6 million a year earlier. Excluding one-time items, earnings jumped to $11.5 million, or $0.72 a share, from $6.4 million, or $0.40. Atlantic closed the sale of its Alltel wireless business to AT&T (symbol T on New York) late last year. It now holds cash of $407.6 million, or $24.64 a share, and has paid off its $271.1 million of debt....
IBM has a long history of drifting in and out of investor favour, mainly due to fear that new technologies will put it out of business. However, IBM also has long history of shifting out of slowing businesses into faster-growing fields. For example, as computer prices fell in the 1990s, IBM expanded its more-profitable software and consulting operations. The company later unloaded its struggling personal computer operations, and is now selling its low-end server business. It will invest the proceeds in areas with better long-term potential, such as cloud computing and analytics software. In addition, IBM’s well-known brand and global salesforce continue to give it a big advantage, particularly in developing countries....
WINDSTREAM HOLDINGS INC. $11 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 602.7 million; Market cap: $6.6 billion; Price-to-sales ratio: 1.2; Dividend yield: 9.1%; TSINetwork Rating: Average; www.windstream.com) gets 73% of its revenue from high-speed Internet and business telecommunications. It also sells regular phone services, mainly in rural parts of the U.S. The stock jumped 20% after the company announced that it would transfer its fibre-optic and copper networks, along with some land and buildings, to a new real estate investment trust (REIT). The company will then lease these assets from the REIT. Windstream plans to hand out units in the new REIT to its own shareholders in the first quarter of 2015....
From time to time, companies set up their subsidiaries as stand-alone companies and hand out shares in these new businesses as a special dividend. Studies have shown that these new firms, called spinoffs, and their former parents tend to outperform groups of comparable stocks for several years. Here are seven of our recommendations that have either been spun off or are about to set up some of their operations as a separate firm. All of these stocks have done well. That’s not surprising, since the spinoffs have come from well-managed parent companies with long histories of rising profits. MONDELEZ INTERNATIONAL INC. $37 (Nasdaq symbol MDLZ; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.7 billion; Market cap: $62.9 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.mondelezinternational.com) took its current form on October 1, 2012, when the old Kraft Foods Inc. broke itself into two publicly traded companies: Mondelez International and Kraft Foods Group....
PEPSICO INC. $89 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.5 billion; Market cap: $133.5 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pepsico.com) continues to face pressure from activist investor Nelson Peltz to spin off or sell its beverage business, which has suffered as health-conscious consumers cut their soft drink consumption. Peltz owns about 1% of the company’s shares. The beverage operations supply 48% of PepsiCo’s sales. The remaining 52% comes from its snack food operations, which include Frito-Lay potato chips and Quaker Oats cereals. The company has rejected the proposal because it feels making both soft drinks and snacks gives it manufacturing, distribution and marketing advantages. Instead, it aims to boost its profits with a new five-year plan that includes automating more of its bottling plants and closing less-efficient facilities. PepsiCo will use the resulting savings to buy back $5 billion worth of its shares in 2014....
NEWELL RUBBERMAID INC. $32 (New York symbol NWL; Aggressive Growth and Income Portfolios, Consumer sector; Shares outstanding: 276.7 million; Market cap: $8.9 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.1%; TSINetwork Rating: Average; www.newellrubbermaid.com) is buying Ignite Holdings, a private company that makes reusable water bottles and thermal mugs under the Contigo and Avex brands. Newell will pay $308 million when it completes the purchase later this year. That’s equal to 57.6% of the $534.9 million, or $1.83 a share, that Newell earned in 2013. The new operations will add $125 million to its annual sales of $5.7 billion. The company feels its expertise will cut Ignite’s manufacturing costs. Newell can also use its extensive global distribution networks to increase Ignite’s sales....