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
RUBY TUESDAY, INC. $7.65 (New York symbol RT; TSINetwork Rating: Speculative) (865-379-5700; www.rubytuesday.com; Shares outstanding: 64.0 million; Market cap: $489.6 million; No dividends paid) reports that its sales rose 0.8% in the three months ended September 4, 2012, to $332.9 million from $330.3 million a year earlier. Sales rose even though the company closed 27 less profitable restaurants. Same-restaurant sales rose 1.9%. Excluding one-time items, the company earned $0.05 a share in the latest quarter, unchanged from a year earlier. That matched the consensus estimate. Ruby Tuesday has developed a number of new restaurant concepts, including Marlin & Ray’s seafood estaurants and Lime Fresh Mexican Grills. The company feels these new layouts will help it compete in certain towns and cities. It’s now building new restaurants under these banners and converting underperforming outlets....
TEMPUR-PEDIC $33.39 (New York symbol TPX; TSINetwork Rating: Speculative) (800- 878-8889; www.tempurpedic.com; Shares outstanding: 59.5 million; Market cap: $2.0 billion; No dividends paid) plans to buy rival Sealy Corp. (symbol ZZ on New York) for $1.3 billion. Sealy, which was founded in 1881, makes a wide range of spring-coil beds under the Sealy, Sealy Posturepedic, Sealy Embody, Stearns & Foster and Bassett brands. The purchase lets Tempur-Pedic diversify into the market for traditional spring-coil beds. Right now, the company manufactures and distributes therapeutic mattresses and pillows made from its Tempur material. But that’s become a more competitive market because other mattress makers have introduced many new products and supported them with aggressive promotions....
FAIR ISAAC CORP. $44.96 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 33.8 million; Market cap: $1.5 billion; Dividend yield: 0.2%) makes FICO Scores, the computer program that dominates the market for software that businesses use to evaluate customer creditworthiness. The company is also profiting by selling software that helps credit card issuers control fraud and analyze their clients’ spending patterns. I In its fiscal 2012 third quarter, which ended June 30, 2012, Fair Isaac’s earnings per share rose 1.7%, to $0.59 from $0.58. That matched the consensus estimate of $0.59. Revenue rose 6.5%, to $160.5 million from $150.7 million.
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ALCOA INC., $8.69, New York symbol AA, reported better-than-expected revenue and earnings this week. However, aluminum demand in China is slowing. That caused the stock to fall 4%. In the three months ended September 30, 2012, Alcoa lost $143 million, or $0.13 a share. That’s partly because the company agreed to pay $85 million to settle a lawsuit that accused it of overcharging for raw materials. If you exclude all unusual items, Alcoa would have earned $0.03 a share in the latest quarter. That beat the consensus estimate of nil per share. A year earlier, the company earned $172 million, or $0.15 a share. Revenue fell 9.1%, to $5.8 billion from $6.4 billion. Aluminum shipments rose 3.1%, but average prices dropped 17.4%. The company also cut its production by 1.5%. But even so, the latest revenue figure beat the consensus estimate of $5.5 billion....
RUBY TUESDAY INC., $7.10, symbol RT on New York, reports that its revenue rose 0.8% in the three months ended September 4, 2012, to $332.9 million from $330.3 million a year earlier. Revenue rose even though the company closed 27 less-profitable restaurants. Same-restaurant sales rose 1.9%. Excluding one-time items, the company earned $0.05 a share in the latest quarter, unchanged from a year earlier. That matched the consensus estimate. The company owns 712 of its U.S. restaurants; franchisees operate 78 outlets in the U.S. and overseas....
HEWLETT-PACKARD CO., $14.73, New York symbol HPQ, fell 14% this week after the company cut its earnings forecast for its 2013 fiscal year, which ends October 31, 2013. Hewlett now expects to earn between $3.40 and $3.60 a share during the year. These figures exclude costs related to the company’s recent restructuring plan, which includes merging its personal computer and printer divisions, simplifying its product lines and cutting 8% of its workforce. The new forecast is well below the consensus estimate of $4.18 a share. The company’s enterprise services division, which sells server computers and services to businesses, recently lost four major customers; this is the main reason for the lower earnings forecast. Consumers are also holding off on computer and printer purchases due to the slow global economy....
FAIRFAX FINANCIAL HOLDINGS, $376.90, symbol FFH on Toronto, owns 43.2% of Cunningham Lindsey, one of the world’s largest insurance claims management companies. Private-equity firm Stone Point Capital LLC holds a 51% interest. Cunningham Lindsey’s services include claims adjusting, appraisal and claims and risk management. Its customers include insurance and reinsurance companies, insurance brokers and multinational corporations....
TEMPUR-PEDIC, $29.89, symbol TPX on New York, jumped as high as $33 this week after it announced plans to buy rival Sealy Corp. (symbol ZZ on New York). Tempur-Pedic will pay $1.3 billion, consisting of $228.6 million in cash plus the assumption of all of Sealy’s debt. Sealy, which was founded in 1881, makes a wide range of spring coil beds under the Sealy, Sealy Posturepedic, Sealy Embody, Stearns & Foster and Bassett brands....
INTERNATIONAL BUSINESS MACHINES CORP., $207.45, New York symbol IBM, continues to expand its software business. In the three months ended June 30, 2012, software accounted for 24% of its total revenue and 43% of its pre-tax earnings. This week, the company paid an undisclosed sum for U.K.-based Butterfly Software Ltd. Businesses use this private firm’s software to collect data from older computers and securely transfer it to remote servers. Butterfly’s products nicely complement IBM’s growing analytics software operations, which help companies quickly gather and analyze a wide range of information....
eBay has moved far beyond its original auction website business in the past 17 years. It’s now a complete e-commerce platform that helps merchants sell their goods and collect payments. Demand for the company’s services should keep rising, particularly in developing countries, where online shopping is growing and there are fewer traditional retailers to compete with. eBay now gets over half of its sales from outside the U.S. EBAY INC. $48 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $62.4 billion; Price-to-sales ratio: 4.8; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) launched its online auction site in September 1995. It now has 104.8 million users worldwide. The company charges users fees to list and sell their goods through its websites. On top of used goods, the company is also selling more merchandise from retailers. That’s helping it compete with Amazon.com. Right now, sales of new items at fixed prices account for over 60% of eBay’s total transactions....