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:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
  3. 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
T. ROWE PRICE GROUP INC. $49 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 252.6 million; Market cap: $12.4 billion; Price-to-sales ratio: 4.7; Dividend yield: 2.5%; TSINetwork Rating: Average; www.troweprice.com) saw the value of mutual funds and other assets it manages fall 5.9%, to $453.5 billion on September 30, 2011, from $482.0 billion at the start of the year. The uncertainty over European sovereign debt and a slowing global economy cut stock prices and spurred investors to redeem their mutual fund units. Most of these redemptions were made by institutional investors. However, the company saw strong demand for its target-date retirement funds for individuals. As a result, T. Rowe Price’s revenue rose 15.9% in the third quarter of 2011, to $679.4 million from $586.1 million a year earlier. Earnings rose 9.6%, to $184.6 million, or $0.71 a share, from $168.4 million, or $0.64 a share. T. Rowe Price is a buy.
FAIR ISAAC CORP. $33 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.7 million; Market cap: $1.2 billion; Price-to-sales ratio: 2.0; Dividend yield: 0.2%; TSINetwork Rating: Average; www.fairisaac.com) sells products and services that help businesses around the world make better decisions on customer creditworthiness. The company is best known for its FICO credit scores, which creditors use to decide if they should give a customer a mortgage, a credit card or any other type of loan. Fair Isaac also makes software that helps credit-card issuers control fraud and analyze cardholders’ spending patterns. Banks and insurance companies provide 78% of Fair Isaac’s revenue.

Recovering from subprime crisis

...
FRONTIER COMMUNICATIONS CORP. $5.35 (www.frontier.com) earned $0.05 a share in three months ended September 30, 2011. That’s down 37.5% from $0.08 a year earlier. These figures exclude unusual costs related to Frontier’s July 2010 purchase of 4 million regular phone, or landline, accounts from Verizon. Revenue fell 8.0%, to $1.3 billion from $1.4 billion. Strong sales of high-speed Internet and video services continues to offset slower sales of landlines and related services. Hold. SNAP-ON INC. $48 (www.snapon.com) earned $1.16 a share in the third quarter of 2011, up 45.0% from $0.80 a year earlier. Revenue rose 8.9%, to $729.9 million from $670.3 million, mainly due to favourable foreign exchange rates and better results from the automotive tool maker’s finance division. The company also raised its quarterly dividend by 6.3%, to $0.34 a share from $0.32. The new annual rate of $1.36 yields 2.8%. Snap-On has maintained or increased its dividend since 1939. Buy. BUCKEYE PARTNERS L.P. $63 (www.buckeye.com) has raised its quarterly distribution for the 30th consecutive quarter, to $1.025 a unit from $1.0125. The new annual rate of $4.10 yields 6.5%. However, Buckeye continues to expand its oil pipelines and storage operations through acquisitions. That adds risk. Hold.
INTERNATIONAL BUSINESS MACHINES CORP., $185.24, New York symbol IBM, rose initially in response to news that Warren Buffett’s Berkshire Hathaway Inc. (New York symbol BRK.A) now owns 5.4% of IBM. However, the stock fell 1% for the week. This is Mr. Buffett’s first major investment in a technology company. IBM’s revenue and earnings growth has slowed recently, due to the weaker global economy, but its long-term outlook remains strong. The company continues to benefit from strong growth in emerging markets, like Russia and Brazil. Strong business growth in these countries is spurring demand for reliable computer services. By 2015, IBM feels these markets will supply 30% of its revenue, up from 23% now....
INTACT FINANCIAL CORP., $56.68, symbol IFC on Toronto, is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power. The company recently completed its purchase of AXA Canada from Paris-based ASX Group for $2.6 billion. To put that in context, Intact’s market cap is $6.3 billion. Intact plans to look for more casualty and property insurers to buy in Canada. That includes other subsidiaries of European insurers, many of which are struggling. Intact estimates that as much as 30% of the Canadian property and casualty market is controlled by foreign-owned insurers....
STANTEC INC. $24.89 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.7 million; Market cap: $1.1 billion; No dividends paid) 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 in 170 locations throughout North America. It also has four international offices. In the three months ended September 30, 2011, the company’s revenue rose 11.3%, to $430.4 million from $386.7 million a year earlier. That partly reflects contributions from companies Stantec recently bought. In addition, the company is working on a number of new projects for customers in a range of industries, including mining and oil and gas. Before one-time items, earnings rose 13.8%, to $28.9 million, or $0.63 a share, from $25.4 million, or $0.55 a share. Stantec continues to grow by acquisition. For example, in October 2011 it bought Entran Inc., a Lexington, Kentucky-based consulting and engineering firm with about 115 employees. Entran specializes in transportation planning, including designing roads and bridges....
GOODYEAR TIRE & RUBBER CO. $13.60 (New York symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 281.0 million; Market cap: $3.8 billion; No dividends paid) is the world’s largest tire maker. It operates over 60 plants in 25 countries. In the three months ended September 30, 2011, the company’s sales rose 22.1%, to a record $6.1 billion from $5.0 billion a year earlier. North American sales climbed 17.5%, to a record $2.6 billion from $2.2 billion. Sales rose 31.3% in Europe, the Middle East and Africa; 14.4% in Latin America; and 20.5% in Asia....
DELPHI ENERGY $2.20 (Toronto symbol DEE; TSI Network Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 119.2 million; Market cap: $262.2 million; No dividends paid) explores for oil and natural gas in Alberta and B.C. The company is now focusing on its Bigstone, Hythe and Wapiti/Gold Creek properties in northwestern Alberta. Gas makes up 72% of Delphi’s daily output; the remaining 28% is oil. In the three months ended September 30, 2011, Delphi’s average daily output rose 10.5%, to a record 8,967 barrels of oil equivalent (including natural gas) from 8,114 barrels a year earlier....
SHERRITT INTERNATIONAL $5.45 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.4 million; Market cap: $1.6 billion; Dividend yield: 2.8%) reports that its earnings per share jumped 114.3% in the three months ended September 30, 2011, to $0.15 from $0.07. Revenue rose 13.0%, to $466.4 million from $412.7 million a year earlier. The improved results were mainly due to higher coal and oil prices. Sherritt is a natural-resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 376 megawatts of power-generation capacity in Cuba....
FAIR ISAAC CORP. $33.98 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 38.7 million; Market cap: $1.3 billion; Dividend yield: 0.2%) makes FICO Scores, which dominates the market for software that businesses use to make better decisions on customer creditworthiness. In addition, the company sells software to help credit-card issuers control fraud and analyze cardholders’ spending patterns. In its fiscal 2011 fourth quarter, which ended September 30, 2011, Fair Isaac’s earnings jumped 55.4%, to $24.6 million from $15.8 million a year earlier. Earnings per share rose 66.7% to $0.65 from $0.39, on fewer shares outstanding. Savings from the company’s ongoing cost cuts were a big part of the increase. The latest earnings also beat the consensus estimate of $0.61 a share. Revenue rose 3.3% to $160.2 million from $155.1 million....