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
MCKESSON CORP., $157.39, New York symbol MCK, recently agreed to buy Celesio AG, a German firm that distributes prescription drugs in Europe and Brazil. The company will pay $8.3 billion for Celesio, including its debt. To put that in context, McKesson’s market cap (or the value of all its outstanding shares) is $36.2 billion. Shareholders representing at least 75% of Celesio’s votes must approve the deal. The family of Celesio’s founder, which controls 50.01%, has already agreed to the takeover. However, Elliott Management, a private equity firm that holds roughly 25% of Celesio’s shares, now opposes the purchase....
AMAZON.COM INC., $384.24, symbol AMZN on Nasdaq, has expanded its AmazonFresh same-day grocery delivery service to San Francisco. The move follows the launch of the service in Los Angeles in June 2013. AmazonFresh has also been available in the company’s hometown of Seattle for some time. AmazonFresh promises same-day or early morning delivery of over 500,000 items, including groceries and food from specialty shops. Delivery is free on orders over $35 if the customer pays a yearly $299 subscription fee. The fee also includes the benefits of Amazon’s Prime service, such as free two-day shipping on most other products sold on Amazon.com. AmazonFresh may help the company achieve its goal of same-day delivery of all its products. In addition to groceries, AmazonFresh trucks will deliver a range of toys, electronics and household goods. Eventually, they could let the company ship to customers directly and do away with the services of UPS or FedEx in many markets. The trucks could also let Amazon pick up returns from customers, again cutting out the courier companies and speeding up service....
APPLE INC., $560.02, Nasdaq symbol AAPL, moved up this week in response to media reports that the company has signed a deal to supply iPhones to China Mobile, that country’s largest wireless carrier, with over 740 million subscribers. The Chinese government recently authorized China Mobile to offer 4G wireless service. That should spur demand for smartphones that can take advantage of the faster speeds that 4G offers, including the new iPhone 5S and 5C models. Apple already sells iPhones to smaller Chinese carriers, but they use an older technology. Adding China Mobile could boost iPhone sales in China by around 17% in the company’s current fiscal year, which ends September 30, 2014....
CHEMTRADE LOGISTICS INCOME FUND, $18.45, symbol CHE.UN on Toronto, jumped almost 9% this week after it agreed to buy specialty chemicals maker General Chemical Corp. for $860 million. General makes a wide range of chemicals, including aluminum sulphate, aluminum chlorohydrate and ferric sulphate (all of which are used in water treatment), as well as ingredients for prescription drugs, nutritional supplements and veterinary products. The company also sells and regenerates sulphuric acid. In addition to water treatment and pharmaceuticals, its markets include oil refining, pulp and paper, agriculture and food and beverage. This is a huge acquisition for Chemtrade: it would more than double its $756.4-million market cap. A major purchase like this can always backfire, but it will likely be a good fit, offering Chemtrade both growth prospects and diversification....
ALIMENTATION COUCHE-TARD, $77.60, symbol ATD.B on Toronto, rose over 6% this week after reporting its latest quarterly earnings. In the three months ended October 13, 2013, the company’s sales fell 3.0%, to $9.0 billion from $9.3 billion a year earlier (all figures except share price in U.S. dollars). The year-ago quarter included 92 days of results from Norway’s Statoil Fuel & Retail ASA, which Couche-Tard bought for $2.7 billion in June 2012, while the latest quarter included just 84 days. The shorter period was due to an adjustment to align Statoil’s accounting period with Couche-Tard’s. That was the main reason for the lower revenue. Excluding that, the company benefited from higher fuel volumes and merchandise sales. Couche-Tard gets about 30% of its revenue by selling merchandise....
HEWLETT-PACKARD CO., $27.35, New York symbol HPQ, rose 9% this week after it reported better-than-expected earnings and revenue. The company continues to make progress on its multi-year restructuring plan, which includes merging its personal computer and printer divisions, simplifying its product lines and cutting 8% of its workforce. In Hewlett’s fiscal 2013 fourth quarter, which ended October 31, 2013, its earnings fell 14.1%, to $2.0 billion, or $1.01 a share, from $2.3 billion, or $1.16 a share, a year earlier. These figures exclude restructuring costs and other unusual items. On that basis, the latest earnings beat the consensus estimate of $1.00 a share....
A key part of our three-part investment approach is to downplay stocks in the broker/media limelight (the other two parts are to invest mainly in well-established companies and spread your money across the five main economic sectors). Tupperware is a good example of an out-of-the-limelight stock. Even though it started up in 1946 and is one of the world’s largest direct sellers of consumer products, few brokers cover it. The company’s independent dealers are an underappreciated asset, because they are cheaper than selling through stores and make it easier to enter new markets. Tupperware can also use its dealers to sell other products in the future. That cuts its need to expand through acquisitions....
WAL-MART STORES INC. $81 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.3 billion; Market cap: $267.3 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.walmart.com) earned $3.9 billion in its fiscal 2014 third quarter, which ended October 31, 2013. That’s up 1.6% from $3.8 billion a year earlier. Per-share earnings gained 6.5%, to $1.14 from $1.07, on fewer shares outstanding. Overall sales rose 1.7%, to $115.7 billion from $113.8 billion. Sales at the company’s U.S. stores, which supply 59% of the total, increased 2.4%. However, same-store sales fell 0.3%, as shoppers lowered their spending due to high unemployment and uncertainty over future health insurance premiums in the wake of the Affordable Care Act (or Obamacare). However, sales at the international stores (29% of the total) gained 4.1%, excluding exchange rates. New locations in fast-growing markets like China and Africa should continue to offset slower sales in the U.S. Moreover, Wal-Mart could unlock some of its value by spinning off its Sam’s Club warehouse outlets (12%). This chain’s sales rose 1.1% in the latest quarter....
Traditional retailers, such as the four we analyze below, face increasing competition from big box stores and online sellers. However, these four firms own some of the best-known brands in the industry. Their popular labels will continue to help them attract shoppers and increase sales through their own websites. Even so, not all of these stocks are buys right now. MACY’S INC. $54 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 376.2 million; Market cap: $20.3 billion; Price-to-sales ratio: 0.8; Dividend yield: 1.9%; TSINetwork Rating: Average; www.macysinc.com) operates 840 Macy’s and Bloomingdale’s department stores in 45 states....
PETSMART INC. $74 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 103.9 million; Market cap: $7.7 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.0%; TSINetwork Rating: Above Average; www.petm.com) operates 1,314 pet stores in the U.S. and Canada. It also has 196 in-store PetsHotels, which look after animals while their owners are away. In the third quarter of its 2014 fiscal year, which ended November 3, 2013, PetSmart’s earnings rose 12.0%, to $92.2 million from $82.3 million a year earlier. The company bought back $30 million of its shares during the quarter. Due to fewer shares outstanding, earnings per share rose 17.3%, to $0.88 from $0.75. Sales rose 4.0%, to $1.7 billion from $1.6 billion. Same-store sales gained 2.7%, while sales of pet services, such as grooming and training, rose 5.2%. Services accounted for 10.9% of PetSmart’s total sales....