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
CHEMTRADE LOGISTICS INCOME FUND $16.73 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 41.7 million; Market cap: $697.6 million; Dividend yield: 7.1%) 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 byproducts as part of their processing activities. Chemtrade converts these substances into useful chemicals, like sulphuric acid. The trust also makes other chemicals. In the three months ended December 31, 2011, Chemtrade’s cash flow per unit jumped 52.5%, to $0.61 from $0.40 a year earlier. Revenue rose 63.4%, to $247.2 million from $151.3 million. That mostly reflects the contribution of Marsulex Inc., which Chemtrade bought for $419.5 million in June 2011. Marsulex provides a range of environmental services, including improving air quality and treating and handling industrial by-products and hazardous waste. Revenue also rose due to rising industrial demand and higher market prices for sulphuric acid....
TIM HORTONS $52.70 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 157.4 million; Market cap: $8.3 billion; Dividend yield: 1.6%) is using its strong earnings to keep expanding. It’s also raising its dividend and buying back shares. Tim Hortons operates 3,295 coffee-and-donut stores in Canada and 714 in the U.S. That’s up from 3,148 Canadian outlets and 602 U.S. stores a year ago. The company’s earnings per share before one-time items rose 25.8% in the latest quarter, to $0.65 from $0.52 a year earlier. Sales rose 21.2%, to $779.8 million from $643.5 million....
TEMPUR-PEDIC $82.30 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempurpedic.com; Shares outstanding: 63.8 million; Market cap: $5.3 billion; No dividends paid) makes and distributes Swedish mattresses and neck pillows made from its Tempur material, which conforms to the body to provide support and help alleviate pressure points. Tempur-Pedic now sells its products in over 80 countries. In the three months ended December 31, 2011, Tempur-Pedic’s sales rose 25.3%, to $366.8 million from $292.7 million. North American sales rose 26%, and international sales gained 25%....
GOODYEAR TIRE & RUBBER CO. $12.32 (New York symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 244.6 million; Market cap: $3.0 billion; No dividends paid) reports that its sales rose 12.0% in three months ended December 31, 2011, to a record $5.7 billion from $5.1 billion a year earlier. The company earned $18 million, or $0.07 a share, compared with a loss of $177.0 million, or $0.73. Earnings benefited from the record sales and the company’s cost cuts, as well as a shift toward higher-priced tires. Rising costs for raw materials, especially rubber, could limit Goodyear’s earnings growth in the near term. However, its long-term outlook is positive....
STANTEC INC. $30.90 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.5 million; Market cap: $1.4 billion; Dividend yield: 1.9%) sells a range of consulting, project delivery, design/build and technology services. The company’s clients operate in a wide variety of markets, including industry, environment, transportation and construction. Stantec has over 11,000 employees at 170 locations throughout North America. It also has four international offices. In the three months ended December 31, 2011, the company’s revenue rose 12.6%, to $432.0 million from $383.7 million a year earlier. Acquisitions were part of the reason for the gains. Stantec is also working on a number of new projects. Before one-time items, earnings rose 4.3%, to $24.3 million, or $0.53 a share, from $23.3 million, or $0.51 a share. Stantec continues to grow by acquisition. In 2011, it bought five companies. Together, these firms added 725 staff to Stantec’s workforce....
RUBY TUESDAY, INC. $7.97 (New York symbol RT; TSINetwork Rating: Speculative) (865-379-5700; www.rubytuesday.com; Shares outstanding: 63.8 million; Market cap: $508.5 million; No dividends paid) owns 742 casual dining restaurants in the U.S. Franchisees operate 43 outlets in the U.S. and 44 overseas. In the three months ended November 30, 2011, Ruby Tuesday’s sales rose 5.9%, to $307.5 million from $290.5 million a year earlier. However, same-restaurant sales fell 4.2%, mostly due to stiff competition from other chains, many of which spent heavily on TV advertising. Ruby Tuesday’s overall sales were helped by its new menu items and specials, including its lunch offer of soup, a salad bowl or garden bar, and garlic cheese biscuits starting at $5.99 to $6.99. Even so, the company lost $0.03 a share, compared to a profit of $0.07 a share a year earlier....
AASTRA TECHNOLOGIES $21.04 (Toronto symbol AAH; TSINetwork Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 14.0 million; Market cap: $294.6 million; Dividend yield: 3.8%) reports that its sales fell 7.1% in the latest quarter, to $199.7 million from $214.9 million a year earlier. Higher sales in Germany were offset by sales declines in Spain and North America. Even so, earnings rose 13.5%, to $18.2 million, or $1.30 a share, from $16.0 million, or $1.14 a share. Aastra’s research expenses fell 17.9%, to $14.8 million from $18.0 million, As well, the company narrowed its foreign exchange loss to $1.3 million from $2.6 million a year earlier. Aastra needs a sustained economic recovery in Europe to raise its sales and further push up its earnings. Still, the stock trades at just 12.0 times the $1.76 a share that the company should earn in 2011. The shares yield a high 3.8%....
ZARGON OIL & GAS $14.04 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 29.4 million; Market cap: $412.8 million; Dividend yield: 8.6%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. The company’s production is 61% oil and 39% natural gas. In the three months ended December 31, 2011, Zargon produced 9,278 barrels of oil equivalent per day. That’s down slightly from 9.317 barrels a year earlier. However, that was mainly because the company sold some less important properties. Higher oil prices pushed up Zargon’s cash flow per share by 7.4%, to $0.58 from $0.54 a year earlier. The company continues to successfully drill horizontal wells in the Alberta Plains North area. Horizontal drilling involves drilling development wells sideways or at an angle to reach isolated pockets of gas or to follow a reservoir spread out in a narrow layer. This method works well in places where conventional drilling is impossible or too expensive....
SHERRITT INTERNATIONAL $5.58 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.7 million; Market cap: $1.7 billion; Dividend yield: 2.7%) reports that its revenue rose 10.6% in the three months ended December 31, 2011, to $536.8 million from $485.2 million a year earlier. Despite the higher revenue, earnings fell 34.2%, to $28.1 million, or $0.10 a share, from $42.7 million, or $0.15 a share. However, without one-time items, such as a charge for the early redemption of debentures, Sherritt would have earned $0.19 in the latest quarter....
VITERRA $14.65 (Toronto symbol VT; TSINetwork Rating: Average) (1-866-569-4411; www.viterra.ca; Shares outstanding: 371.7 million; Market cap: $5.4 billion; Dividend yield: 1.0%) is up almost 31% since the company said it has received expressions of interest from unnamed parties interested in taking it over. The stock was our Pick of the Month in the last issue (March 2012) of Stock Pickers Digest. At the time, it was trading at $10.09. That’s a 45.2% gain in one month. Our view is 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....