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.
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Growth Stocks Library Archives
CALIAN TECHNOLOGIES $19.74 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 7.6 million; Market cap: $150.0 million; Dividend yield: 5.3%) has acquired Primacy Management of Burlington, Ontario. Since 2003, Primacy has been designing, building and managing in-store pharmacies for Loblaw. Primacy now operates 112 such clinics in Loblaw’s stores across Canada. Primacy will add about $3 million a year to Calian’s revenue. To put that figure in perspective, Calian’s revenue was $56.8 million in the quarter ended December 31, 2011. Calian also expects the acquisition to immediately add to its earnings....
PASON SYSTEMS $13.55 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 81.9 million; Market cap: $1.1 billion; Dividend yield: 3.0%) rents equipment for monitoring and managing oil and gas rigs. It also sells communication systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas producers and drilling contractors throughout Canada, the U.S., Mexico, Argentina and Australia. In the three months ended December 31, 2011, Pason’s revenue rose 32.8%, to $97.6 million from $73.5 million a year earlier. Many of the company’s clients increased their drilling, especially for shale gas and oil. Earnings jumped 201.2%, to $31.7 million, or $0.39 a share, from $10.5 million, or $0.13 a share. The increased drilling pushed up Pason’s earnings. It also let the company raise its prices....
MCDONALD’S CORP., $96.84, New York symbol MCD, reported lower-than-expected same-store sales for February 2012. That caused the stock to fall 2% this week. The restaurant chain’s same-store sales rose 7.5% during the month. That missed the consensus forecast of a 7.7% increase. Even so, it’s a big jump from the 3.9% sales gain the company reported in February 2011. Most of the increase came from its U.S. operations, where same-store sales rose 11.1% thanks to strong demand for a new popcorn chicken product (Chicken McBites), premium coffees and breakfast items. Same-store sales rose 4.0% in Europe, where strong gains in the U.K. and Russia offset lower sales in other markets due to severe winter weather. Same-store sales rose just 2.4% in Asia, partly due to lower sales in Japan, which is still recovering from last year’s earthquake/tsunami....
VITERRA INC., $13.58, symbol VT on Toronto, jumped almost 21% today after the company said it had received expressions of interest from unnamed parties interested in taking it over. Viterra is a Saskatchewan-based agribusiness that mainly operates in Canada and Australia. The company accumulates, stores, transports, processes and markets grains, oilseeds and specialty crops, including lentils and mustard. 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 34.6% gain in less than 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....
APPLE INC., $545.18, Nasdaq symbol AAPL, hit an all-time high of $548.21 this week, mainly due to speculation that the company will unveil the next version of its iPad tablet computer, the iPad 3, in the coming days. Apple has sold more than 55 million iPads since it first launched the device in 2010. Even though many of the company’s competitors now sell tablets, iPads still account for over 60% of this fast-growing market. Separately, Apple has recently agreed to let China Telecom sell its new iPhone 4S smartphone; China Telecom is China’s third-largest wireless carrier, with 15 million customers. Apple already sells the iPhone though China Unicom, China’s second-largest carrier. Apple also hopes to work out a deal with China Mobile after it upgrades its systems to handle the iPhone 4S. China Mobile is the country’s largest wireless provider, with 650 million subscribers....
STANTEC INC., $29.83, symbol STN on Toronto, sells a range of consulting, project delivery, design/build and technology services. The company’s clients operate in a variety of industries, including transportation, construction and oil and gas. Stantec has over 11,000 employees in 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....
INTERNATIONAL BUSINESS MACHINES CORP., $197.76, New York symbol IBM, is now developing software that helps prevent online data theft. The company’s analytics software already helps businesses and governments quickly gather and analyze a wide range of data. This technology is used in many ways, from easing traffic congestion in cities to making power grids more efficient. This week, IBM demonstrated software that can detect and prevent unauthorized access to databases by analyzing certain patterns, such as failed login attempts. This product could be in huge demand, particularly in light of recent high-profile attacks on U.S. government websites....
DUNDEE REIT, $34.63, symbol D.UN on Toronto, owns and manages 18.9 million square feet of office, industrial and retail space. The real estate investment trust’s occupancy rate is 95.6%. In the three months ended December 31, 2011, Dundee’s revenue jumped 73.2%, to $136.3 million from $78.7 million a year earlier. Most of the increase came from properties the trust recently purchased. The best way to assess a real estate investment trust’s operating performance is to look at its cash flow, and Dundee’s cash flow rose 62.6% in the latest quarter, to $41.0 million from $25.2 million. Cash flow per unit rose 12.7%, to $0.62 from $0.55, due to more units outstanding (the trust issued new units to pay for the acquired properties)....
Visa has gained nearly 53% since we first recommended it at $76 in our December 2010 issue. And we think the company still has lots of growth ahead. That’s partly because Visa is in a strong position to profit from the global surge in e-commerce and cashless transactions. At the same time, its trusted brand will help it keep expanding in fast-growing markets like Asia and Latin America. Moreover, Visa is a financial intermediary, so it doesn’t lose money if cardholders fail to pay their bills. Instead, banks that issue Visa cards assume liability, set repayment terms and evaluate customer creditworthiness. That cuts Visa Inc.’s risk....
WAL-MART STORES INC. $59 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.4 billion; Market cap: $200.6 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.walmart.com) is buying 51% of Yihaodian, a Chinese company that sells groceries, clothing, consumer electronics and other goods over the Internet. Wal-Mart did not say how much it is paying for this investment, but it already owns a minority stake in Yihaodian. This familiarity cuts the risk of an unpleasant surprise. As well, Wal-Mart’s expertise will help this company expand sales and cut costs. The deal should close later this year. This is the latest in a series of acquisitions that have expanded Wal-Mart’s overseas operations. That’s helping it offset slower growth in the U.S., which accounts for 60% of its overall sales....