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
CINTAS CORP. $63 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 117.0 million; Market cap: $7.4 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.2%; TSINetwork Rating: Average; www.cintas.com) earned $374.4 million in its 2014 fiscal year, which ended May 31, 2014, up 18.7% from $315.4 million in 2013. Per-share earnings rose 21.0%, to $3.05 from $2.52, on fewer shares outstanding. If you exclude a gain on the sale of Cintas’s document-shredding business, it would have earned $2.79 a share in fiscal 2014. Revenue rose 5.5%, to $4.6 billion from $4.3 billion, as the improving economy spurred demand for Cintas’s uniform-rental and office-cleaning services. The company will probably earn $3.06 to $3.15 a share in fiscal 2015. The stock trades at a high, but still reasonable, 20.3 times the midpoint of that range....
MOTOROLA SOLUTIONS INC. $65 (New York symbol MSI; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 255.3 million; Market cap: $16.6 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.9%; TSINetwork Rating: Average; www.motorolasolutions.com) took its current form on January 4, 2011, when the old Motorola Inc. spun off its struggling cellphone business, Motorola Mobility, as a separate firm. The remaining operations became Motorola Solutions after the breakup. The company makes specialized communications equipment, such as radios for police and fire vehicles. Government clients account for about 70% of its revenue. Motorola Solutions recently agreed to sell its enterprise division, which provides the remaining 30% of its revenue. This business makes bar-code scanners and interactive kiosks for corporate clients....
STATE STREET CORP. $72 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 425.0 million; Market cap: $30.6 billion; Price-to-sales ratio: 3.2; Dividend yield: 1.7%; TSINetwork Rating: Average; www. statestreet.com) sells accounting and administrative services to large institutional investors, such as mutual funds and pension plans. The company’s fee income rises and falls with the value of the securities it manages. Thanks to improving stock markets and new contracts, earnings rose 5.6% in the quarter ended June 30, 2014, to $603 million from $571 million a year earlier. State Street spent $410 million on share buybacks in the latest quarter. As a result, earnings per share gained 12.1%, to $1.39 from $1.24. Revenue rose 3.7%, to $2.7 billion from $2.6 billion....
VERIZON COMMUNICATIONS INC. $52 (New York symbol VZ, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 4.1 billion; Market cap: $213.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.1%; TSINetwork Rating: Average; www.verizon.com) recently completed its $130-billion purchase of the 45% of Verizon Wireless that it didn’t already own from U.K.-based Vodafone Group. The company now owns 100% of Verizon Wireless, which sells wireless services to 104.6 million subscribers in the U.S. Wireless now supplies 68% of Verizon’s revenue. The remaining 32% comes from its 20.4 million regular phone customers and 16.2 million high-speed Internet and digital TV subscribers. Thanks mainly to the Verizon Wireless purchase, the company’s earnings per share jumped 24.7% in the three months ended June 30, 2014, to $0.91 from $0.73 a year earlier. Revenue gained 5.7%, to $31.5 billion from $29.8 billion. The company should earn $3.54 a share in 2014, and the stock trades at 14.7 times that forecast. The $2.12 dividend yields 4.1%....
BHP BILLITON LTD. ADRs $72 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 1.6 billion; Market cap: $115.2 billion; Price-to-sales ratio: 2.9; Dividend yield: 3.3%; TSINetwork Rating: Average; www. bhpbilliton.com) is the world’s largest mining company, with major operations in Australia, South Africa, the U.S. and the U.K. BHP’s main products include iron ore (31% of revenue; 43% of earnings), oil and potash (20%; 32%), copper (18%; 16%), coal (17%; 6%), and aluminum, manganese and nickel (14%; 3%). BHP cuts its risk by focusing on projects with high-quality, long-lasting reserves.
Oil and gas expansion spurred results
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FAIR ISAAC CORP. $59 (www.fico.com) earned $20.5 million in the quarter ended June 30, 2014. That’s up 4.7% from $19.6 million a year earlier. Earnings per share rose 9.1%, to $0.60 from $0.55, on fewer shares outstanding....
TUPPERWARE BRANDS CORP., $74.04, New York symbol TUP, makes household products, including educational toys and plastic food and beverage containers. It also produces a range of cosmetics, bath oils and fragrances. This week, the company reported quarterly earnings that matched the consensus estimate. However, weaker sales in developed markets like North America and Europe prompted it to cut its full-year sales and earnings projections. That caused the stock to fall 12%. Excluding unusual items, Tupperware’s earnings declined 4.1% in the three months ended June 28, 2014, to $75.1 million from $78.3 million a year earlier. Per-share earnings rose 0.7%, to $1.47 from $1.46, on fewer shares outstanding....
MAJOR DRILLING GROUP INTERNATIONAL INC., $8.92, symbol MDI on Toronto, jumped over 14% this week after agreeing to buy privately held Taurus Drilling Services for $27.7 million, plus a further $11.5 million tied to performance. Taurus, which operates in Canada, the U.S. and Mexico, provides underground longhole drilling to mining companies. Longhole drilling is used in operating mines to drill holes for various purposes, including blasting, drainage, electrical service and ventilation. The acquisition includes Taurus’s 39 drill rigs, together with related equipment, inventory and contracts. Major is also keeping the company’s management and employees, which include experienced drillers....
TIM HORTONS $60.17 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 134.3 million; Market cap: $8.1 billion; Dividend yield: 2.1%) operates 3,610 coffee-anddonut shops in Canada, 870 in the U.S. and 44 in the Persian Gulf. In the quarter ended March 30, 2014, sales rose 4.8%, to $766.4 million from $731.5 million a year ago. The gain was mainly because the company opened 23 outlets in Canada and 11 in the U.S. Samestore sales rose 1.6% at its Canadian locations and 1.9% in the U.S. Earnings rose 5.5%, to $90.9 million from $86.2 million. In the past nine months, the company has repurchased $1 billion worth of shares. As a result, its earnings per share jumped 17.9%, to $0.66 from $0.56....
ALIMENTATION COUCHETARD $29.50 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard.com; Shares outstanding: 565.8 million; Market cap: $16.6 billion; Dividend yield: 0.5%) plans to keep looking for big acquisitions like its $2.7-billion purchase of Norway’s Statoil Fuel & Retail gas station chain in June 2012. However, the company has a long history of not overpaying for acquisitions; in 2010, it dropped its $2-billion U.S. hostile takeover offer for Casey’s General Stores after competitor 7-Eleven outbid it. And earlier this year, it stayed out of the running to buy oil and gas giant Hess Corp.’s 1,354 U.S. gas stations and convenience stores. Marathon Petroleum eventually paid $2.9 billion. Meanwhile, Couche-Tard’s sales rose 2.0% in the quarter ended April 27, 2014, to $9.0 billion from $8.8 billion a year ago. Earnings per share rose 10.0%, to $0.22 from $0.20. (All figures except share price and market cap in U.S. dollars. Per-share amounts adjusted for a 3-for-1 stock split on April 14, 2014)....