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
PROCTER & GAMBLE CO., $63.03, New York symbol PG, is one of the world’s largest makers of household and personal-care products. Some of its top brands include Tide detergent, Crest toothpaste, Head & Shoulders shampoo and Pampers diapers. In April 2011, the company agreed to merge its Pringles potato-chip business with Diamond Foods Inc. (Nasdaq symbol DMND), which makes a variety of snack foods, including potato chips, nuts and popcorn. Pringles accounts for less than 4% of Procter’s revenue and earnings. Under the terms of the deal, Procter will give its investors the option to exchange some or all of their shares for a holding in Diamond. That would give Procter shareholders 57% of the combined company. Diamond investors would own the remaining 43%....
TRILOGY ENERGY CORP., $35.29, symbol TET on Toronto, owns oil and gas properties in the Kaybob and Grande Prairie areas of central Alberta. About 71% of Trilogy’s production is natural gas. The remaining 29% is oil. In the three months ended September 30, 2011, Trilogy produced an average of 29,035 barrels of oil equivalent per day (including natural gas). That was up 29.3% from 22,462 barrels a day a year earlier. Trilogy’s daily production should rise to an average of 30,000 barrels for all of 2011. Cash flow per share rose 82.1%, to $0.51 from $0.28 a year earlier; the production increase and higher oil prices were the main reasons for the gain....
TUPPERWARE BRANDS CORP., $59.47, New York symbol TUP, makes high-quality household products, including plastic food and beverage containers and educational toys. It also makes wide range of cosmetics, bath oils and fragrances. The company continues to see strong demand in fast-growing economies, such as Asia and Latin America. Tupperware now gets 63% of its sales from these markets. That’s helping it offset slower sales in North America and Europe. In the three months ended October 1, 2011, Tupperware earned $50.3 million. That’s up 23.3% from $40.8 million a year earlier. During the quarter, the company spent $195.7 million on share buybacks. Due to fewer shares outstanding, earnings per share rose 29.7%, to $0.83 from $0.64....
MOSAID TECHNOLOGIES INC., $45.95, symbol MSD on Toronto, has agreed to a friendly, $46.00-a-share, all-cash takeover offer from U.S.-based private-equity firm Sterling Partners. Mosaid mainly licenses computer chip and telecommunications technology, including patents for technology used in smartphones and laptops. The Sterling Partners bid counters last week’s $42-a-share hostile offer from Wi-LAN. Prior to that, Wi-LAN had offered $38 a share....
These two well-established food makers are using different strategies to increase their sales and profits. Heinz continues to expand overseas, while ConAgra prefers to focus on its domestic business. Both companies continue to cut costs and improve their efficiency. Both strategies should help Heinz and ConAgra spur their longterm growth, and give them lots of room to keep raising their dividends. As well, both continue to trade at attractive multiples to earnings....
MCDONALD’S CORP. $92 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.0 billion; Market cap: $92.0 billion; Price-to-sales ratio: 3.6; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.mcdonalds.com) is a good example of a high-quality stock that continues to thrive despite stock-market weakness. The stock is now around 44.3% above the $63.75 peak that it hit prior to the 2009 market downturn. Its profits have grown thanks in part to new menus items, such as premium coffees and oatmeal. In the third quarter of 2011, sales rose 13.7%, to $7.2 billion from $6.3 billion a year earlier. Same-store sales rose 5.0%. Earnings rose 8.6%, to $1.5 billion from $1.4 billion. Earnings per share rose 12.4%, to $1.45 from $1.29, on fewer shares outstanding....
Chipmakers and software firms operate in highly competitive, fast-changing fields. To cut your risk, we recommend sticking with industry leaders who have built up strong reputations with their customers. These firms also have the financial strength to absorb the high cost of developing new products. Here are three tech companies that are leaders in their niche markets. Sales and earnings at all three are rising, but we see only two as buys at today’s prices. ADOBE SYSTEMS INC. $28 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 490.9 million; Market cap: $13.7 billion; Price-to-sales ratio: 3.4; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) makes software that lets...
INTEL CORP. $25 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.3 billion; Market cap: $132.5 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.intel.com) reported record revenue of $14.2 billion in the three months ended October 1, 2011. That’s up 28.2% from $11.1 billion a year earlier. Most of these gains came from strong sales of chips for notebook computers. Revenue from these products rose 21.7% in the quarter. Sales of chips for servers rose 14.9%. Earnings rose 17.4%, to a record $3.5 billion from $3.0 billion. During the quarter, Intel bought back $4.0 billion of its shares. Because of fewer shares outstanding, earnings per share rose 25.0%, to $0.65 from $0.52. The company spent 15.0% of its revenue on research in the latest quarter, so it’s more profitable than it seems. Intel is a buy.
SARA LEE CORP. $18 (New York symbol SLE; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 590.7 million; Market cap: $10.6 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.saralee.com) has agreed to sell most of its North American coffee operations to J.M. Smucker Co. (New York symbol SJM) for $350 million. The deal should close by the end of 2011. This business, which accounts for 6% of Sara Lee’s total revenue, sells a variety of coffee, tea and related equipment to restaurants. Smucker has also agreed to license Sara Lee’s coffee-making technology for an additional $50 million over the next 10 years. To put these figures in context, Sara Lee earned $338 million, or $0.54 a share, in the fiscal year ended July 2, 2011. This sale is part of Sara Lee’s plan to break itself into two separate, publicly traded companies. One of these firms will consist of Sara Lee’s international coffee and tea businesses. The other will focus on its North American packaged meat operations. The company aims to complete the breakup in the first six months of 2012....
WEYERHAEUSER CO. $17 (New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 538.7 million; Market cap: $9.2 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.5%; TSINetwork Rating: Extra Risk; www.weyerhaeuser.com) is a leading maker of forest products. It owns or leases over 21 million acres of timberland in the U.S. and Canada. Weyerhaeuser recently converted to a real estate investment trust (REIT). In connection with this change, it paid a special dividend in September 2010 that consisted of $560 million in cash and 324 million common shares. Many of Weyerhaeuser’s rivals operate as REITs, so this conversion will help it compete. REITs pay little or no income tax, and must pay 90% of their earnings to their shareholders as dividends. Right now, Weyerhaeuser pays a regular quarterly dividend of $0.15 a share, for a 3.5% annualized yield....