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
LIMITED BRANDS INC., $42.61, New York symbol LTD, rose 11% this week, mainly because the company will pay a special dividend of $2.00 a share on December 23, 2011. That’s in addition to its regular quarterly dividend of $0.20 a share, for a 1.9% annualized yield. Limited Brands owns the Victoria’s Secret lingerie chain and the Bath & Body Works personal-care products stores. It also owns the La Senza lingerie chain in Canada. The company also reported that its sales fell 2.3% in November 2011, to $872.6 million from $893.0 million in November 2010. However, that’s mainly because the company recently sold 51% of a business that buys apparel from various manufacturers. On a same-store basis, sales rose 7% during the month....
NISSAN MOTOR CO., $18.15, symbol NSANY on Nasdaq, reported record U.S. sales in November. Overall, the company sold 85,182 cars and trucks in the U.S. during the month. That’s up 19.4% from 71,366 vehicles in November 2010. The Nissan division’s sales jumped 21.5% to a record 76,754 vehicles. Sales of Infiniti vehicles rose 3.0%, to 8,428 vehicles. The all-new Versa Sedan sold particularly well. Rising demand for this car lifted overall sales of the Versa subcompact by 38.2%, to a total of 9,291 vehicles. Nissan Altima sales continued to be strong: the company sold 20,613 of these cars in November, up 12.2% over the prior year. As well, sales of the Rogue crossover jumped 27.2% in November, to a record 10,845 vehicles....
AMERIGO RESOURCES, $0.53, symbol ARG on Toronto, processes copper and molybdenum from the waste rock from Chile’s El Teniente, the world’s largest copper mine. This contract runs through 2021. Amerigo has a further agreement to process material from the nearby Colihues tailings pond. The company gets 94% of revenue by processing copper. The remaining 6% comes from molybdenum. In the three months ended September 30, 2011, Amerigo’s revenue rose 6.8%, to $42.0 million from $39.3 million a year earlier (all figures except share price in U.S. dollars). Higher copper prices offset lower production and molybdenum prices....
AT&T INC., $27.41, New York symbol T, is facing strong opposition from regulators over its planned purchase of rival wireless carrier T-Mobile from Germany’s Deutsche Telekom AG. Adding T-Mobile would make AT&T the largest wireless carrier in the U.S., with 132 million subscribers. The Federal Communications Commission feels the combination of AT&T and T-Mobile would hurt competition in the wireless market. As well, the Department of Justice has launched a court challenge to block the deal. The trial should begin in February 2012. Due to the growing uncertainty over this deal, AT&T said that it will record a $4-billion charge against its earnings for the fourth quarter of 2011. That represents the break-up fee ($3 billion in cash plus $1 billion in wireless spectrum) that AT&T agreed to pay Deutsche Telekom if it can’t complete the purchase....
World stock market investing remains risky. That’s because many emerging countries have language barriers, weak investor-protection laws, less commitment to openness, fairness and so on. A better way for North American investors to profit from rapid overseas growth is by investing in well-established, multinational U.S. companies. These firms’ well-known brands put them in a good position to enter new markets and quickly win over new customers. A great example of a U.S. company with a knack for successfully expanding overseas is Yum Brands, one of our long-time favourites....
DIAGEO PLC ADRs $80 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 624.5 million; Market cap: $50.0 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.diageo.com) is the world’s largest premium alcoholic beverage company. Like Yum Brands, U.K.-based Diageo is another Consumer stock that gives investors a less-risky way to profit from overseas markets. In the fiscal year ended June 30, 2011, Diageo’s sales rose 1.6%, to 9.9 billion pounds from 9.8 billion pounds (1 British pound = $1.63 Canadian). Sales in markets such as Latin America and Africa rose 13%, while sales in Asia Pacific grew 9%. These gains offset slower sales in North America (up 3%) and Europe (down 3%). Diageo earned 2.1 million pounds, or 3.34 pounds per ADR (each American Depositary Receipt represents four Diageo common shares). That’s up 16.3% from 1.8 billion pounds, or 2.88 pounds per ADR, in fiscal 2010....
Retail spending continues to rise in the U.S., even with continued weakness in job and housing markets. That’s good news for these three leading department-store operators. All three should continue to benefit from the investments they have made in new stores, and in building their brands and online businesses. MACY’S INC. $30 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 420.6 million; Market cap: $12.6 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.3%; TSINetwork Rating: Average; www.macysinc.com) operates 810 Macy’s and 41 Bloomingdale’s department stores in 45 states....
WAL-MART STORES INC. $56 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.5 billion; Market cap: $196.0 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.walmart.com) is benefitting from recent acquisitions of retailers in South Africa and the U.K. That’s helping it offset slower growth in the U.S. In the three months ended October 31, 2011, sales rose 8.1%, to $110.2 billion from $102.0 billion a year earlier. Earnings fell 2.5% to $3.5 billion from $3.6 billion, mainly because of a lower tax bill in the year-earlier quarter. Earnings per share rose 2.1%, to $0.97 from $0.95, on fewer shares outstanding. Wal-Mart is a buy.
THE BOEING CO. $63 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 743.2 million; Market cap: $46.8 billion; Price-to-sales ratio: 0.7; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.boeing.com) has received an order from Indonesia’s Lion Air for 201 of its 737 MAX passenger jet planes and 29 of its extended-range 737 aircraft. In all, this order is worth a record $21.7 billion. If Lion Air exercises its option to buy an additional 150 planes, the order’s value would rise to $35 billion. That’s equal to roughly half of Boeing’s annual sales of $68 billion. The company will deliver these planes between 2017 and 2025. Boeing is a buy.
Many investors avoid small cap stocks, because they tend to more volatile than larger companies. You can offset this risk by sticking with small caps that are leaders in their niche markets. Here are three of our favourite small-cap stocks. However, only two are buys right now. MTS SYSTEMS CORP. $37 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.6 million; Market cap: $577.2 million; Price-to-sales ratio: 1.3; Dividend yield: 2.7%; TSINetwork Rating: Average; www.mts.com) makes equipment and software that tests materials, machines and structures. This helps manufacturers lower their costs and improve the quality of their products. MTS continues to see strong demand for its technology. New orders rose 27.5% in its 2011 fiscal year, which ended October 1, 2011, to a record $540.0 million from $423.5 million in 2010....