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
SARA LEE CORP., $20.13, New York symbol SLE, will break itself into two publicly traded companies on June 28, 2012. Under this plan, Sara Lee will hand out shares of one of these new companies, D.E. Master Blenders 1753 N.V., to its own shareholders. D.E. Master Blenders will consist of Sara Lee’s international coffee and tea businesses. It will be based in the Netherlands, and its shares will trade on the Amsterdam Stock Exchange under the DE symbol. Investors will receive one share of D.E. Master Blenders for each Sara Lee common share they hold. This is a tax-deferred distribution, so investors will only be liable for capital-gains taxes on their new shares when they sell them. Shareholders will also receive a special cash dividend of $3.00 a share....
TEMPUR-PEDIC, $25.54, symbol TPX on New York, has cut its revenue and earnings forecasts for this year. That caused the stock to fall almost 42% this week. The company manufactures and distributes therapeutic mattresses and pillows made from its Tempur material. Tempur-Pedic now expects to report 2012 earnings of $2.70 a share on revenue of $1.43 billion. That’s down from its previous forecast of $3.80 to $3.95 a share in earnings on $1.6 billion to $1.65 billion of revenue. The consensus estimate was for full-year earnings of $3.93 a share on revenue of $1.64 billion....
DIAGEO PLC ADRs, $93.40, New York symbol DEO, is the world’s largest premium alcoholic beverage company. Its major brands include Guinness stout, Smirnoff vodka, Johnnie Walker scotch whisky, Captain Morgan rum and Bailey’s Irish Cream. This week, Diageo agreed to buy the rights to Ypioca, a popular brand of cachaca in Brazil. Cachaca is a liquor that is made from sugar-cane juice. Diageo is paying roughly 300 million British pounds for this business (1 British pound = $1.60 Canadian). To put that in context, the company earned 953 million pounds, or 1.53 pounds per ADR, in the six months ended December 31, 2011. (Each American Depositary Receipt represents four Diageo common shares.)...
CHESAPEAKE ENERGY CORP., $15.58, symbol CHK on New York, has attracted the interest of activist investor Carl Icahn, who has purchased 7.6% of the natural gas producer. Mr. Icahn now aims to replace four of Chesapeake’s nine directors with his own nominees. The stock is down nearly 50% in the past year. That’s largely because rising production of shale gas and record-warm winter temperatures have increased gas supplies and depressed prices. The stock has also suffered in the past month on allegations that Aubrey K. McClendon, the company’s co-founder, CEO and chairman, took out loans that could put him in a conflict of interest. In response, Chesapeake’s board of directors has removed McClendon from his position and will soon replace him with an independent chairman....
HEWLETT-PACKARD CO., $22.33, New York symbol HPQ, rose 4% this week after the company unveiled a new restructuring plan. It also reported better-than-expected sales and earnings. Hewlett’s plan mainly involves merging its personal computer and printer businesses into a single division. It will also cut 8% of its workforce over the next two years. The company expects to pay $3.5 billion in severance and other costs. However, these moves should save it $3.0 billion to $3.5 billion annually. Hewlett will put most of these savings toward developing new products and services. It’s particularly interested in fast-growing areas like cloud computing, analytics software (which lets companies track consumer purchasing and other data) and computer security....
ALIMENTATION COUCHE-TARD INC., $40.67, symbol ATD.B on Toronto, recently agreed to buy Norway’s Statoil Fuel & Retail ASA for $2.8 billion U.S. That’s equal to 39% of Couche-Tard’s $7.3-billion market cap. 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. Norway’s largest North Sea oil producer, government-controlled Statoil ASA, owns 54% of publicly traded Statoil Fuel....
Newell’s shares are up about 13% since the start of 2012. That’s more than double the S&P 500 Index’s 4.9% rise. And we think the company has even bigger gains ahead. That’s because Newell’s latest restructuring has made it much more efficient, and it’s using the cash it’s saving to develop topselling products, buy back shares and raise its dividend. NEWELL RUBBERMAID INC. $18 (New York symbol NWL; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 289.9 million; Market cap: $5.2 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.2%; TSINetwork Rating: Average; www.newellrubbermaid.com) makes plastic storage bins, tools, window blinds, pens and a number of other household items. Its top brands include Rubbermaid, Sharpie, Paper Mate, Parker, Graco, Irwin, Waterman and Levolor....
PETSMART INC. $63 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 108.4 million; Market cap: $6.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 0.9%; TSINetwork Rating: Above Average; www.petsmart.com) recently hit a new all-time high after it reported strong earnings and sales for its latest quarter. The stock is now up 96.9% since we first recommended it at $32 in our October 2007 issue. The company is the biggest petsupply chain in the U.S. In all, it operates 1,241 pet stores in the U.S. and Canada. It also has 194 in-store PetsHotels, which look after pets while their owners are away. In the first quarter of PetSmart’s 2013 fiscal year, which ended April 29, 2012, its earnings rose 33.5%, to $94.7 million from $70.9 million a year earlier. The company spent $175 million buying back its shares during the quarter. Due to fewer shares outstanding, earnings per share rose 39.3%, to $0.85 from $0.61....
American Depositary Receipts make foreign investing easier and safer for individual investors. The foreign company must provide detailed financial information to U.S. regulators and to the sponsor, or depositary, bank or broker. As well, since ADRs trade on U.S. stock exchanges in U.S. dollars, you don’t have to worry about currency exchange rates, foreign stock exchange rules, or language barriers. We have a high opinion of these four global leaders, but not all are buys right now. BHP BILLITON LTD. ADRs $63 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.7 billion; Market cap: $170.1 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.5%; TSINetwork Rating: Average; www.bhpbilliton.com) is the world’s largest mining company, with operations in Australia, South Africa, Chile and the U.K. It produces iron ore, coal, oil, natural gas, aluminum, manganese, diamonds and titanium....
XEROX CORP. $7.19 (New York symbol XRX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.4 billion; Market cap: $10.1 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.4%; TSINetwork Rating: Average; www.xerox.com) recently started providing services to businesses, such as processing credit card applications and insurance claims. That’s helping the company lower its reliance on more cyclical sales of office equipment, like copiers and printers. In the three months ended March 31, 2012, Xerox’s revenue rose 0.7%, to $5.50 billion from $5.47 billion a year earlier. However, ongoing investments to expand its services operations cut its earnings by 4.5%, to $319 million from $334 million a year earlier. Earnings per share were unchanged at $0.23. Xerox is a hold.