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.
Read More
Close
Growth Stocks Library Archives
DOREL INDUSTRIES $29.34 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 32.6 million; Market cap: $956.5 million; Dividend yield: 2.0%) makes a wide range of products, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; recreational products, including bicycles; and home furnishings. It has 5,000 employees and plants in 22 countries. In the three months ended December 31, 2011, Dorel’s sales rose 4.1%, to $561.6 million from $539.5 million a year earlier (all figures except share price in U.S. dollars). Revenue at the company’s home furnishings division rose 22.8% on higher sales to U.S. retailers. That offset weaker revenue at the other divisions. Earnings per share rose 7.6%, to $0.85 from $0.79 a year earlier....
AMAZON.COM $191.07 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 455.1 million; Market cap: $87.0 billion; No dividends paid) has agreed to buy Kiva Systems for $775 million. Kiva makes small orange robots that help manage warehouse inventory. Amazon’s shipping volumes continue to rise. In response, the company plans to add 17 more warehouses, bringing its total to 69. The Kiva purchase will let Amazon better control its labour costs. Amazon can also sell the robots to other retailers. Kiva’s clients already include the Gap, Staples and Saks....
Long-time readers know that we are constantly reevaluating our stock picks. Here are three stocks that have only limited growth prospects for the foreseeable future. We now see them as sells. CASH STORE FINANCIAL SERVICES INC. $5.52 (Toronto symbol CSF; TSINetwork Rating: Speculative) (780-408-5110; www.csfinancial.ca; Shares outstanding: 17.4 million; Market cap: $96.0 million; Dividend yield: 8.7%) operates 573 stores under two banners: The Cash Store and Instaloans. Both chains offer consumer payday loans (advances on upcoming paycheques). The company faces increasing regulations in the payday loan industry. It has also been forced to pay a number of penalties, the latest being a March 2012 order from the B.C. government to refund its customers millions of dollars in overpaid interest and extra charges. These transactions date back to 2009....
ADOBE SYSTEMS $33.39 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536 -6000; www.adobe.com; Shares outstanding: 496.1 million; Market cap: $16.6 billion; No dividends paid) reports that in its fiscal 2012 first quarter, which ended March 2, 2012, its earnings fell 21.1%, to $185.2 million, or $0.37 a share. A year earlier, it earned $234.6 million, or $0.46 a share. Without unusual items, earnings per share fell 1.7%, to $0.57 from $0.58. Sales rose 1.7%, to $1.05 billion from $1.03 billion. Customers are waiting for the new version of Adobe’s Creative Suite of publishing programs, which it will release later this year. That was the main reason for the lower earnings and weak sales growth. The stock trades at 13.8 times the $2.42 a share that Adobe will probably earn in fiscal 2012. The company also holds cash and investments of $2.8 billion, or $5.53 a share. Its long-term debt of $1.5 billion is just 9% of its market cap....
SASOL LTD. (ADR) $46.49 (New York symbol SSL; TSINetwork Rating: Extra Risk) (082-883-9697; www.sasol.com; ADRs outstanding: 641.4 million; Market cap: $29.9 billion; Dividend yield: 5.3%) is a South Africa-based company that has developed a technology to convert coal and natural gas into motor fuels. In the six months ended December 31, 2011, Sasol’s revenue rose 23.9%, to $11.0 billion from $8.9 billion a year earlier (all figures in U.S. dollars). Earnings per ADR rose 81.8%, to $3.04 from $1.67. Higher oil prices were the main reason for the gains. A stronger U.S. dollar against the South African rand also pushed up the value of sales outside South Africa. Last year, Sasol paid $2.2 billion for a 50% interest in two major shale gas properties held by Talisman Energy (symbol TLM on Toronto) in the Montney Basin region of western Alberta and northeastern B.C....
VITERRA $15.95 (Toronto symbol VT; TSINetwork Rating: Average) (1-866-569-4411; www.viterra.ca; Shares outstanding: 371.7 million; Market cap: $5.9 billion; Dividend yield: 1.0%) has agreed to a friendly takeover offer from Glencore International plc, a Switzerland-based commodity trader. The purchase price is $6.1 billion, or $16.25 per Viterra share. Viterra was our Pick of the Month in the March 2012 issue of Stock Pickers Digest. At the time, it was trading at $10.09. That’s a 58.1% gain since that recommendation. Our view was that the company is well positioned to benefit from an expected rise in Canadian and Australian crop yields in 2012, as well as the end of the Canadian Wheat Board’s monopoly on western Canadian wheat and barley sales. In addition, its Australian operations’ sales to Asia continue to rise. We also said that Viterra might be an attractive takeover target....
TOROMONT INDUSTRIES LTD. $22.42 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 76.8 million; Market cap: $1.7 billion; Dividend yield: 2.1%) 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 right). Shareholders received shares of the new Toromont and shares of Enerflex. That company leases and sells equipment and services for natural gas production, including field production plants and compression and processing plants. In the three months ended December 31, 2011, higher equipment sales and rentals pushed up Toromont’s revenue by 19.1%, to $408.4 million from $342.9 million a year earlier. Without one-time items, earnings per share rose 22.2% to $0.44 from $0.36, on the higher revenue and improved profit margins....
SASOL LTD. (ADR), $45.65, 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. Sasol also produces 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. Sasol is also South Africa’s third-largest coal producer. In the six months ended December 31, 2011, Sasol’s revenue rose 23.9%, to $11.0 billion from $8.9 billion a year earlier (all figures in U.S. dollars). Earnings per ADR rose 81.8%, to $3.04 from $1.67. Higher oil prices were the main reason for the gains. A stronger U.S. dollar against the South African rand also pushed up the value of sales outside South Africa....
GOOGLE INC., $624.60, Nasdaq symbol GOOG, currently has two share classes: the class A shares, which have one vote each, and the class B shares, which have 10 votes each. Only the class A shares are listed and traded. This week, the company announced that it would create a new share class: the non-voting class C shares, which will trade on Nasdaq. Existing class A and B shareholders will receive one class C share for each share they currently hold, for an effective 2-for-1 stock split. The proposal requires the approval of shareholders voting as a single group at the company’s annual meeting on June 21, 2012. Insiders control about 92% of the class B shares, which gives them 66% of the total votes, so the plan should pass easily....
PLEASE NOTE: Our next Hotline will go out on Friday, April 13, 2012. VISA INC., $121.01, New York symbol V, operates the world’s largest retail electronic payments network. The company processes credit, debit, prepaid and commercial payments under the Visa, Visa Electron, Interlink and PLUS brands. The company often uses third-party payment processors, provided they comply with Visa’s security standards and other requirements....