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
These two leading software makers have each gained about 20% since the start of 2012. However, the slowing European economy could limit their progress. SYMANTEC CORP. $18 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 729.4 million; Market cap: $13.1 billion; Price-to-sales ratio: 2.0; No dividends paid; TSINetwork Rating: Average; www.symantec.com) sells anti-virus and email filtering software to businesses and consumers. In its fiscal 2012 third quarter, which ended December 30, 2011, Symantec’s earnings rose 15.4%, to $314 million from $272 million a year earlier. Earnings per share gained 20.0%, to $0.42 from $0.35, on fewer shares outstanding. These figures exclude asset writedowns and costs to integrate acquisitions....
TERADATA CORP. $68 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 168.3 million; Market cap: $11.4 billion; Price-to-sales ratio: 4.8; No dividends paid; TSINetwork Rating: Average; www.teradata.com) saw its revenue rise 22.0% in 2011, to $2.4 billion from $1.9 billion in 2010. Earnings per share rose 24.7%, to $2.32 from $1.86. The company should continue to profit from strong demand for its analytics services, which help businesses gather and analyze large amounts of data, including customer purchasing patterns. However, at over 27 times earnings, the stock could drop suddenly if Teradata’s earnings fail to live up to expectations. Teradata is a hold.
One way to cut your risk and earn higher profits in the highly cyclical aerospace business is to stick with global leaders. Here are two with bright prospects. UNITED TECHNOLOGIES CORP. $83 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 908.9 million; Market cap: $75.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.utc.com) aims to complete its purchase of Goodrich Corp. (New York symbol GR) later this year. Goodrich makes a wide range of aircraft parts, including landing gear, wheels and brakes. It also maintains and repairs planes. United Technologies is paying a total of $18.4 billion, including $1.9 billion of Goodrich’s debt. Goodrich looks like a good fit with United Technologies’ other aerospace operations: Pratt & Whitney aircraft engines; Hamilton Sundstrand aircraft controls; and Sikorsky helicopters. Goodrich will add $8 billion to United Technologies’ yearly revenue....
NEWMONT MINING CORP. $53 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 495.1 million; Market cap: $26.2 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.6%; TSINetwork Rating: Average; www.newmont.com) stopped construction of its 51.35%-owned Conga gold/copper mine in Peru in November 2011. The move was in response to protests by local farmers who fear the mine will contaminate water supplies. An independent group is now reviewing the mine’s environmental impact, and should release its report in April 2012. Meanwhile, Newmont has cut 6,000 jobs at Conga. That will lower its losses until it can restart the project. Newmont is a buy.
WAL-MART STORES INC. $61 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.4 billion; Market cap: $207.4 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.walmart.com) is launching a new service that will let its customers upload their DVD and Blu-ray movies to its computer servers. That will let them download their movies from anywhere, and watch them on any device. Demand for this new service could be strong, particularly as more people use tablet computers and smartphones to watch videos online. It will also help draw more customers to Wal-Mart’s VUDU website, which lets users purchase and download movies. Wal-Mart is a buy....
MOLSON COORS BREWING CO. $43 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 180.6 million; Market cap: $7.8 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.0%; TSINetwork Rating: Average; www.molsoncoors.com) earned $701.5 million, or $3.76 a share, in 2011. That’s up 5.2% from $666.9 million, or $3.56 a share, in 2010. Sales rose 8.0%, to $3.5 billion from $3.3 billion; the company increased its selling prices in response to rising ingredient costs. That helped it offset a 0.7% drop in beer volume. The company continues to realize big savings from MillerCoors, its joint venture in the U.S. with rival brewer SABMiller. Combined with savings from its own restructuring plan, Molson Coors cut its costs by $106.6 million in 2011....
MCKESSON CORP. $87 (New York symbol MCK; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 246.1 million; Market cap: $21.4 billion; Price-to-sales ratio: 0.2; Dividend yield: 0.9%; TSINetwork Rating: Above Average; www.mckesson.com) is the largest wholesale drug distributor in the U.S. and Canada. It also owns 49% of Mexico’s largest drug distributor. McKesson’s customers include 40,000 pharmacies, as well as doctor’s offices, hospitals and clinics. The company also supplies surgical tools and health and beauty products. McKesson’s revenue rose 20.6%, from $93.0 billion in 2007 to $112.1 billion in 2011 (fiscal years end March 31). Earnings jumped 45.2%, from $881 million in 2007 to $1.3 billion in 2011. Because of fewer shares outstanding, earnings per share shot up 68.2%, from $2.89 in 2007 to $4.86 in 2011....
AMERICAN EXPRESS CO. $57 (www.americanexpress.com) earned $4.09 a share in 2011, up 22.1% from $3.35 in 2010. Revenue rose 8.6%, to $30.0 billion from $27.6 billion. The company had 76.7 million credit and charge cards in use at the end of 2011, up 7.1% from 71.6 million a year earlier. Average spending per card rose 12.2% in 2011. Buy. AT&T CORP. $32 (www.att.com) is thinking about selling most of its Yellow Pages telephone directory business. That would free up cash that AT&T can use to expand its wireless and high-speed Internet networks. Buy. DUN & BRADSTREET CORP. $84 (www.dnb.com) has temporarily suspended its Chinese marketing subsidiary following allegations that its data collection practices violate China’s consumer privacy laws. This business only supplies 1% of Dun & Bradstreet’s sales, so the shutdown will have little impact on the company. Buy.
J.P. MORGAN CHASE & CO., $44.57, New York symbol JPM, has passed the Federal Reserve’s latest “stress test”, which measures how well banks and other financial firms would cope with a sharp jump in unemployment, falling stock prices and other unfavourable economic conditions. As a result, Morgan raised its quarterly dividend by 20.0%, to $0.30 a share from $0.25. The new annual rate of $1.20 yields 2.7%. Morgan also announced that it would buy back $15 billion of its shares. That’s equal to roughly 9% of its $170.1-billion market cap. Morgan will repurchase $12 billion of its stock this year and an additional $3 billion in 2013. The dividend hike and buybacks prompted the stock to jump 9% this week. However, low interest rates continue to hurt the revenue the bank receives on loans. Financial reforms passed by Congress also imposed new restrictions on debit card fees....
ALIMENTATION COUCHE-TARD, $31.94, symbol ATD.B on Toronto, reported sharply higher sales and earnings in the latest quarter. The company is the largest convenience store operator in Canada, with over 2,000 outlets. It also has nearly 3,700 U.S. stores. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. In the three months ended January 29, 2012, Couche-Tard’s earnings rose 24.7% to $86.8 million from $69.6 million a year earlier (all figures except share price in U.S. dollars). Earnings per share rose 28.9%, to $0.49 from $0.38, on fewer shares outstanding....