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
CHESAPEAKE ENERGY $16.96 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 664.7 million; Market cap: $11.3 billion; Dividend yield: 2.1%) reports that activist investor Carl Icahn has increased his stake in the company to 8.98% from 7.5%. Icahn, who has a long history of pushing companies to make changes that increase shareholder value, acquired his original 7.5% interest in May 2012. He continues to push for cost-cutting measures and a more conservative approach to spending. The company is also selling assets to pay down its debt and focus on properties with strong growth potential....
DOMINO’S PIZZA $42.06 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 56.8 million; Market cap: $2.4 billion; No dividends paid) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,040 outlets in the U.S. and over 70 in other countries. Franchisees run most of these stores. In the quarter ended September 9, 2012, the company’s earnings per share rose 22.2%, to $0.44 from $0.36 a year earlier. Sales rose slightly, to $378.1 million from $376.3 million. Same-store sales rose 5.0% internationally and 3.3% in the U.S. Domino’s continues to boost its sales by aggressively promoting its new pizza recipes. It’s also profiting by moving into digital ordering on the Internet and through software applications (or apps) on smartphones. In addition, Domino’s still has lots of growth potential overseas....
RUBY TUESDAY, INC. $7.89 (New York symbol RT; TSINetwork Rating: Speculative) (865-379-5700; www.rubytuesday.com; Shares outstanding: 63.7 million; Market cap: $502.6 million; No dividends paid) has appointed J.J. Buettgen as its new president and CEO. The move comes after Ruby Tuesday’s founder, Sandy Beall, stepped down in June after heading the company for 40 years. Buettgen was formerly the chief marketing officer at Darden Restaurants (symbol DRI on New York). Darden is the world’s largest casual-dining operator, with more than 2,000 restaurants in the U.S. and Canada. Ruby Tuesday has developed a number of new concepts, including Marlin & Ray’s seafood restaurants and Lime Fresh Mexican Grills, so it needs someone with experience promoting multiple brands. As well, Buettgen has worked on turning around Darden’s wellestablished but underperforming Olive Garden and Red Lobster chains....
REITMANS (CANADA) LTD. $11.75 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514- 384-1140; www.reitmans.com; Shares outstanding: 65.5 million; Market cap: $769.6 million; Dividend yield: 6.8%) reports that its sales fell 7.0% in the three months ended October 27, 2012, to $236.2 million from $254.1 million a year earlier. Same-store sales declined 4.0%. The company earned $38,000, or nil per share, compared to a profit of $10.6 million, or $0.16 a share, a year earlier. In June 2012, Reitmans installed new inventorymanagement software at its distribution centre, and complications with this system have disrupted shipments to its stores. In the latest quarter, that cut sales at the company’s outlets by $7 million to $15 million and caused a corresponding drop in profits....
MAJOR DRILLING $9.80 (Toronto symbol MDI; TSINetwork Rating: Speculative) (1-866- 264-3986; www.majordrilling.com; Shares outstanding: 79.1 million; Market cap: $775.2 million; Dividend yield: 2.0%) is a large contract-drilling firm that mainly serves the mining industry. In the three months ended October 31, 2012, Major’s revenue fell 6.6%, to $199.6 million from $213.9 million a year earlier. Earnings per share declined 34.9%, to $0.28 from $0.43. Most of the company’s large- and midsized mining customers maintained their drilling activity during the latest quarter, but orders from junior miners slowed. That’s because juniors are having difficulty raising funds in today’s uncertain resource markets....
TOROMONT INDUSTRIES LTD. $21.77 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 76.3 million; Market cap: $1.6 billion; Dividend yield: 2.2%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. Toromont also makes refrigeration systems through its CIMCO division. In July 2011, the company completed the spinoff of Enerflex Ltd. (see at right). Shareholders received shares of the new Toromont and shares of Enerflex. Sales and profits keep rising...
SASOL LTD. (ADR), $42.53, symbol SSL on New York, has developed a technology to convert coal and natural gas into motor fuels. The company is now the world’s largest producer of fuel from coal at its facility in Secunda, South Africa. It also makes synthetic fuels from natural gas at plants in Qatar and Nigeria. In addition, the company has substantial chemical production interests and produces oil and gas in Africa. It’s also South Africa’s third-largest coal producer. Sasol is now considering spending up to $21 billion to build a complex in Louisiana to turn natural gas into chemicals, diesel and other fuels. The company expects to spend $5 billion to $7 billion on a chemical plant. It would later add an $11-billion to $14-billion gas-to-liquids facility. Sasol will make a final decision on the project in 2014....
BAXTER INTERNATIONAL INC., $65.07, New York symbol BAX, is buying Gambro AB, a privately held Swedish company that makes dialysis products. Gambro’s main customers are hospitals and clinics. Its equipment nicely complements Baxter’s own dialysis products, which individuals use at home. Baxter can also use its large sales force to increase Gambro’s sales. Baxter will pay $4.0 billion for Gambro when the deal closes in the first half of 2013. That’s equal to 11% of Baxter’s $35.8-billion market cap....
YUM! BRANDS INC., $67.08, New York symbol YUM, fell 10% today due to weaker-than-expected sales in China. The company’s KFC, Pizza Hut and other restaurants in China account for 50% of its total sales, and 45% of its earnings. In the fourth quarter of 2012, Yum expects same-store sales in China will fall 4%. However, same-store sales should rise 4% at its other international outlets, and 3% in the U.S. Yum still expects to earn $3.24 a share in 2012, which is a 13% gain over 2011. However, this forecast fell short of the consensus forecast of $3.28. The stock trades at 20.7 times the new estimate. That’s still a reasonable p/e ratio in light of its long-term growth prospects: Yum expects earnings to grow by at least 10% in 2013....
ALIMENTATION COUCHE-TARD, $49.07, symbol ATD.B on Toronto, reported sharply higher sales and earnings in its latest quarter. The company is the largest convenience store operator in Canada, with over 2,000 outlets. It also has nearly 3,700 U.S. stores. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. In the three months ended October 14, 2012, Couche-Tard’s sales jumped 80.8% to $9.3 billion from $5.2 billion a year earlier. The gain mostly came from Norway’s Statoil Fuel & Retail ASA, which Couche-Tard bought for $2.7 billion in June 2012 (all figures except share price in U.S. dollars). The company also benefited from higher fuel prices and merchandise sales. Couche-Tard gets about 30% of its sales by selling merchandise....