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
CONAGRA FOODS INC. $25 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 415.4 million; Market cap: $10.4 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.conagrafoods.com) makes a wide variety of packaged foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Peter Pan peanut butter and Orville Redenbacher popcorn. In ConAgra’s 2012 fiscal year, which ended May 27, 2012, sales rose 7.8%, to $13.3 billion from $12.3 billion in fiscal 2011. That’s partly due to several recent acquisitions. The company also raised its prices to offset higher ingredient costs. Earnings per share rose 5.1%, to $1.84 from $1.75. These figures exclude several unusual items, such as losses on commodity-hedging contracts and costs related to changes in the way the company accounts for contributions to employee pension plans. ConAgra expects its earnings to rise to $1.97 a share in fiscal 2013. The stock trades at 12.7 times that estimate. The annual dividend rate of $0.96 yields 3.8%....
STANLEY BLACK & DECKER INC. $62 (New York symbol SWK; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.9 million; Market cap: $10.6 billion; Price-to-sales ratio: 1.0; Dividend yield: 2.6%; TSINetwork Rating: Average; www.stanleyblackanddecker.com) is one of the world’s largest makers of hand and power tools for consumers. Its top-selling brands include Stanley, Black & Decker, FatMax and Powerlock. This business supplied 51% of Stanley’s 2011 sales and 46% of its earnings. The company’s building-security division makes locks, automatic doors and gates. It also monitors properties for its clients, typically through closed-circuit audio and TV systems. This division accounts for 25% of Stanley’s sales and 27% of its earnings. The remaining 24% of sales and 27% of earnings comes from selling specialized tools to industrial users, such as auto mechanics and construction firms....
MOTOROLA SOLUTIONS INC. $47 (www.motorolasolutions.com) is buying U.K.-based Psion plc, which specializes in handheld computers and other mobile devices that are used in harsh environments. The $200 million price is equal to 1.3 times the $159 million, or $0.50 a share, that Motorola Solutions earned in the first quarter of 2012. Psion should immediately add to its earnings when the deal closes later this year. Buy. C.R. BARD INC. $104 (www.crbard.com) has raised its quarterly dividend by 5.3%, to $0.20 a share from $0.19. The new annual rate of $0.80 yields 0.8%. The medical device maker also plans to buy back $500 million of its shares. If you include $88 million remaining on Bard’s current repurchase authorization, the total of $588 million is equal to 7% of its $8.7-billion market cap. Buy. KRAFT FOODS INC. $37 (www.kraft.com) now trades on Nasdaq under the “KFT” symbol. The move will substantially cut the company’s annual listing fees. Best Buy.
ALIMENTATION COUCHE-TARD INC., $44.47, symbol ATD.B on Toronto, has succeeded in its bid to buy Norway’s Statoil Fuel & Retail ASA for $2.7 billion. Couche-Tard says that 94.1% of Statoil Fuel’s shareholders have tendered to its offer. It also bought an additional 2.7% stake in Statoil Fuel on the stock market. That raises its total ownership to 96.8%. Under Norwegian law, Couche-Tard can now compel the remaining investors to tender their stock. Statoil Fuel has over 1,700 gas stations in Scandinavia and over 550 in Central and Eastern Europe. The company accounts for over 30% of convenience store sales in Norway, Sweden, Denmark, Latvia and Estonia, and is among the top five in both Lithuania and Poland....
MICROSOFT CORP., $30.70, Nasdaq symbol MSFT, plans to launch a new tablet computer, called the Surface, powered by its upcoming Windows 8 operating system. The company will make two versions of the Surface, both of which will feature a 10.6-inch touch-screen display and a protective cover with a built-in keyboard. The first version will cost about the same as similar tablets. The second, more expensive model will run Microsoft’s Office suite of business programs and will cost about the same as a lightweight laptop computer. The company did not say when it would start selling these devices, but it will probably launch the cheaper model this fall, before the Christmas shopping season....
ALARMFORCE INDUSTRIES $9.19 (Toronto symbol AF; TSINetwork Rating: Speculative) (1-800-267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $112.1 million; Dividend yield: 1.1%) sells two-way voice alarm systems and monitoring services in Canada and increasingly in the U.S. It’s also adding to its prospects with its VideoRelay system, which it launched in October 2011. In the three months ended April 30, 2012, AlarmForce’s sales rose 10.2%, to a record $11.1 million from $10.1 million a year earlier. Even so, the company lost $0.02 a share, compared to a profit of $0.07 a share. Earnings fell because it increased its advertising spending as it expanded into Florida. AlarmForce also invested more in VideoRelay, which lets subscribers watch their homes through computers and smartphones. Users can either view live video or receive alerts when the system detects motion. VideoRelay also lets you establish two-way voice communication through the camera, which could scare off burglars....
We first recommended WAJAX CORP. $47.35 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212-3300; www.wajax.ca; Shares outstanding:16.6 million; Market cap: $786.0 million; Dividend yield: 6.8%) in the May 2012 Stock Pickers Digest. We thought the company had considerable hidden value. It’s not a household name, but its 117 dealerships across Canada sell to a range of customers in growing markets like mining, oil sands, pipelines and public infrastructure. Wajax also trades at a low price-to-earnings ratio of 11.5, based on this year’s forecast profits, and its recent 35% dividend increase gives it a high 6.8% yield....
FAIR ISAAC CORP. $42.44 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 34.3 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. In its fiscal 2012 second quarter, which ended March 31, 2012, Fair Isaac’s earnings per share excluding one-time items jumped 41.0%, to $0.55 from $0.39. The company’s ongoing cost cuts were a major reason for the increase. Sales rose 4.4%, to $159.5 million from $152.8 million. Fair Isaac spends around 10% of its sales on research. That lets it keep producing innovative new products that help it stay ahead of its competitors....
WESTJET AIRLINES $15.73 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 130.1 million; Market cap: $2.0 billion; Dividend yield: 1.5%) is upgrading its interline agreement with Korean Air to a full codesharing deal. WestJet will now be able to sell seats on Korean Air flights. That will let WestJet serve more cities without having to add flights of its own. Code-sharing agreements are especially valuable for attracting business passengers, because they let customers seamlessly connect between flights and gain frequent flyer points for the entire distance travelled....
CHEMTRADE LOGISTICS INCOME FUND $15.05 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 41.7 million; Market cap: $627.6 million; Dividend yield: 8.0%) is one of North America’s largest providers of removal services for resource firms, such as oil refineries and base-metal processors. These companies create sulphur, acid and other by-products as part of their processing activities. Chemtrade converts these substances into useful chemicals, like sulphuric acid. In the three months ended March 31, 2012, Chemtrade’s revenue rose 34.4%, to $227.9 million from $169.6 million. That mostly reflects the contribution of Marsulex Inc., which Chemtrade bought for $419.5 million in cash and stock in June 2011. Cash flow rose 6.0%, to $27.5 million from $25.9 million. Cash flow per share fell 28.6%, to $0.66 from $0.84, on more shares outstanding from the Marsulex purchase....