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
Many consumers are still putting off buying big-ticket items like furniture. That’s hurting sales and profits at Leon’s and BMTC. Leon’s cross-Canada operations make it less risky than BMTC, which only has stores in Quebec. But both are holds for now. LEON’S FURNITURE LTD. $11.50 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.0 million; Market cap: $805.0 million; Dividend yield: 3.5%) has built its chain of over 76 furniture stores on its four main strengths: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; strong after-sales service; and aggressive TV, radio and print advertising. In the three months ended June 30, 2012, Leon’s sales fell 1.1%, to $162.1 million from $163.9 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales....
AEROPOSTALE INC. $13.63 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 81.3 million; Market cap: $1.1 billion; No dividends paid) is down almost 32% since early August after it lowered its forecast for its fiscal 2012 second quarter. The company now expects to break even, down from its previous forecast of a profit of $0.03 to $0.05 a share. Consensus estimates were for a $0.06-a-share profit. Aeropostale operates in a highly competitive market. That means it has to constantly refresh its clothing lines with popular new colours and styles. It should be able to repeat its past success at attracting customers, but sales may remain weak in the near term....
TOROMONT INDUSTRIES LTD. $21.10 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 76.4 million; Market cap: $1.6 billion; Dividend yield: 2.3%) 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 below). Shareholders received shares of the new Toromont and shares of Enerflex. In the three months ended June 30, 2012, higher equipment sales and rentals, particularly to mining customers, pushed up Toromont’s revenue by 10.1%, to $379.6 million from $344.6 million a year earlier. Without one-time items, earnings per share rose 9.7% to $0.34 from $0.31, on the higher sales and improved profit margins....
THE CHURCHILL CORP. $8.16 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.4 million; Market cap: $199.1 million; Dividend yield: 5.9%) is down 32% from mid-July after it reported a $0.17-a-share loss in the quarter ended June 30, 2012. The loss is mainly the result of project delays. Higher-than-expected rainfall slowed work on its Calgary Airport runway project and a housing development in Saskatoon. As well, construction of Winnipeg’s new football stadium was stalled because subcontractors failed to deliver steel structures on time. Despite this setback, Churchill’s long-term prospects remain sound. Meanwhile, its dividend, which yields a high 5.9%, looks safe....
BIRCHCLIFF ENERGY $7.00 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 141.4 million; Market cap: $989.8 million; No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 75% of Birchcliff’s production is natural gas. The remaining 25% is oil. Prominent Toronto investor Seymour Schulich is the company’s largest shareholder; he owns about 28% of its outstanding shares. In the three months ended June 30, 2012, Birchcliff’s production rose 27.2%, to 22,039 barrels of oil equivalent per day (including natural gas) from 17,324 barrels a year earlier....
SHERRITT INTERNATIONAL $4.54 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.7 million; Market cap: $1.3 billion; Dividend yield: 3.4%) reports that its revenue fell 2.5% in the three months ended June 30, 2012, to $487.9 million from $500.6 million a year earlier. Cash flow fell 10.7%, to $81.6 million, or $0.28 a share, from $91.4 million, or $0.31 a share. Lower nickel prices and a drop in thermal coal sales were the main reasons for the declines. The company is Cuba’s largest foreign investor; its Cuban operations account for the majority of its revenue and earnings. The country’s uncertain political and economic situation adds to the stock’s risk. However, Sherritt is diversifying away from Cuba by investing in other countries....
Profits continue to rise at Domino’s Pizza thanks to the company’s new and popular pizza recipes. Ruby Tuesday remains profitable, but it continues to look for new ways to attract more customers in its highly competitive market. DOMINO’S PIZZA $34.22 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 56.7 million; Market cap: $1.9 billion; No dividends paid) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 9,924 outlets in the U.S. and over 70 in other countries. Franchisees run most of these stores. In the quarter ended June 17, 2012, the company’s earnings per share rose 17.5%, to $0.47 from $0.40 a year earlier. Costs fell, including a 12% drop in cheese prices....
WYNDHAM WORLDWIDE $50.86 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973-753-6000; www.wyndhamworldwide.com; Shares outstanding: 142.2 million; Market cap: $7.2 billion; Dividend yield: 1.8%) saw its revenue rise 4.5% in the three months ended June 30, 2012, to $1.14 billion from $1.1 billion a year earlier. Its occupancy rate rose 3.6%. Before one-time items, earnings rose 35.9%, to $0.87 a share from $0.64. To further boost its results, Wyndham is expanding in fast-growing markets like Asia and Latin America. The company’s outlook is positive, but the shares now trade at a high 19.1 times its latest 12 months of earnings....
DOREL INDUSTRIES $29.65 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 31.9 million; Market cap: $945.8 million; Dividend yield: 4.0%) has just doubled its quarterly dividend, to $0.30 from $0.15. The shares now yield a high 4.0%. The increase follows the company’s strong 2012 second-quarter results. In the three months ended June 30, 2012, Dorel’s sales rose 2.4%, to $633.7 million from $619.0 million a year earlier (all figures except share price in U.S. dollars). Revenue increased at all three of the company’s divisions. Earnings per share rose 35.7%, to $0.95 from $0.70 a year earlier. The gain resulted from the higher revenue and increased sales of more profitable products. The company holds cash of $45.1 million, or $1.44 a share. Its long-term debt of $316.8 million is a reasonable 33.5% of its $945.8-million market cap....
BROADRIDGE FINANCIAL SOLUTIONS $22.88 New York symbol BR: TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 124.9 million; Market cap: $2.9 billion; Dividend yield: 3.2%) reports that its earnings rose 12.6% in its 2012 fiscal year, which ended June 30, 2012, to $198.0 million from $175.8 million in 2011. Earnings per share climbed 13.1%, to $1.55 from $1.37, on fewer shares outstanding. Revenue rose 6.3%, to $2.3 billion from $2.2 billion. The company continues to do a good job of attracting new clients and holding on to existing ones. Acquisitions also contributed to the gains. Moreover, Broadridge has finished moving its data centre to IBM under an outsourcing contract that expires in June 2022. This deal should save the company roughly $25 million a year....