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
RUSSEL METALS $21.53 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 67.0 million; Market cap: $1.3 billion; Dividend yield: 5.6%) is one of North America’s largest metal distributors. The company serves its roughly 30,000 customers through a network of 50 locations in Canada and 12 in the U.S. In the three months ended June 30, 2011, Russel’s earnings per share rose 26.8%, to $0.52 from $0.41 a year earlier. Revenue rose 22.1%, to $618.6 million from $506.6 million. The company distributed more steel during the quarter, even though flooding in western Canada pushed down demand for pipe for oil drilling. Steel prices weakened, but the company was able to keep its profits high, because it does a good job of controlling its costs....
GOOGLE INC., $524.85, Nasdaq symbol GOOG, has paid an undisclosed sum for privately held Zagat, which publishes reviews of restaurants, hotels, theatres and other tourist attractions in over 100 countries. Zagat, which was founded in 1979, bases its ratings on information it receives from consumer surveys. It then sells this information through printed guides and its web site. Zagat will give Google access to local content that is not available to other Internet-search providers. As well, the company can add Zagat’s reviews to its other services, like Google Maps, which displays street maps and helps users find their way to their destinations. Zagat’s reviews should also enhance the appeal of mobile devices powered by Google’s Android operating system....
IAMGOLD CORP., $22.39, symbol IMG on Toronto, owns the Niobec niobium mine in Quebec. Niobium is a rare metal that when used as an additive makes steel stronger, more heat resistant and easier to weld. Niobium is widely used in automobiles and oil and gas pipes. Right now, China accounts for about 25% of worldwide niobium consumption. IAMGold’s Niobec mine produces about 8% of the world’s niobium supply. The company is considering selling a 10% to 20% stake in Niobec, and using the proceeds to fund the mine’s expansion. After that, the company will consider selling more of the mine. IAMGold’s plan for Niobec looks especially attractive this week, after a consortium of five state-owned Chinese companies announced that they are buying 15% of the world’s largest niobium producer for $1.95 billion in cash. Brazil’s Companhia Brasileira de Metalurgia e Mineraçào, or CBMM, produces more than 80% of the world’s niobium supply....
AT&T INC., $28.05, New York symbol T, fell 3% this week after the Department of Justice said it would launch a court challenge to block the company’s deal to buy 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. Regulators feel that the purchase would give AT&T too much control over the wireless market, and lead to higher rates for customers. AT&T is paying $39 billion ($25 billion in cash, and $14 billion in stock) for T-Mobile. That’s equal to 23% of AT&T’s $166.2-billion market cap. If the deal falls through, AT&T will pay Deutsche Telekom $3 billion, and give it the rights to some of its wireless spectrum....
CAMECO CORP., $22.23, symbol CCO on Toronto, has launched a hostile takeover bid for Hathor Exploration (symbol HAT on Toronto). Cameco is offering $520 million, or $3.75 a share. Hathor’s main exploration properties are on the east side of the Athabasca Basin. This region contains all of Canada’s producing uranium mines, and accounts for 23% of global production. Right now, Hathor is exploring for uranium at its Midwest Northeast project, which is close to producing properties owned by Cameco and AREVA of France....
APPLE INC., $383.58, Nasdaq symbol AAPL, announced this week that Steve Jobs has resigned as its chief executive officer. However, he will continue as chairman of Apple’s board of directors. Jobs’ health has been an ongoing risk factor for Apple investors. That’s because has played a large role in developing some of Apple’s most successful products, such as the iPhone and iPad. The stock fell 6% on the news, but quickly recovered. That’s because Jobs has hired executives who will probably continue to create innovative products....
COMPUTER MODELLING GROUP LTD., $12.43, symbol CMG on Toronto, makes software and supplies services that help its clients get as much oil as possible from their existing wells. The company makes mostly recurring revenue from software licences and consulting contracts. That gives it long-term stability. In the three months ended June 30, 2011, Computer Modelling’s revenue rose 32.2%, to $15.9 million from $12.1 million a year earlier. Licence revenue rose 42%; that more than offset a 19% drop in consulting and professional services revenue, due to the strong Canadian dollar. Earnings rose 57.6%, to $6.7 million, or $0.18 a share, from $4.2 million, or $0.12 a share....
Google has become one the world’s best-known brands since it was formed in 1998. For many Internet users, the Google search engine is the only way to find information online. Under Google’s business model, it gives away most of its products and services for free, then makes money by selling ads. Google is drawing advertisers away from traditional print and TV ads, because it is able to help advertisers zero in on potential customers. We feel Google still has plenty of growth ahead, particularly as it has only begun selling ads on its newer services, including its YouTube video-sharing site and Google+ social network. Moreover, the stock trades at only 16.9 times earnings. That’s cheap in light of the strength of Google’s brand and its vast growth potential. GOOGLE INC. $523 (Nasdaq symbol GOOG; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 322.9 million; Market cap: $168.9 billion; Price-to-sales ratio: 5.0; No dividends paid; TSINetwork Rating: Above Average; www.google.com) is the world’s leading Internet search engine. Right now, the company has about two-thirds of the Internet search market. That’s because its well-developed search technology gives it an advantage over its competitors....
HEWLETT-PACKARD CO. $25 (New York symbol HPQ; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 2.1 billion; Market cap: $52.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.hp.com) dropped sharply last month, after it announced a major transformation. Its plans include selling or spinning off its personal computer operations, which supply 30% of its revenue. Computer sales will probably continue to suffer as more people use smartphones and tablet devices to access the Internet. Meanwhile, intense competition is hurting this division’s profit margins. However, Hewlett will hang on to its highly profitable printing operations. The company also wants to sell more computer services and software to business clients. That’s why it is paying $10 billion for U.K.-based Autonomy Corp., which makes software that helps businesses organize emails, web pages and company documents....
Right now, the U.S. credit-rating industry is dominated by three firms: Standard & Poor’s (which is owned by McGraw-Hill, below), Moody’s and Fitch. However, Standard & Poor’s recent downgrade of U.S. Treasury bonds has drawn new attention to the entire industry. This increased scrutiny makes it more likely that regulators will open up the industry to more competition. Regulators could also force these firms to disclose how they make their decisions. Even with these challenges, we feel credit-rating providers like the three we analyze below will continue to play a vital role in the global economy. Moreover, the recent stock-market turmoil is prompting many investors to turn to bonds. That should continue to fuel demand for bond ratings, in particular. MCGRAW-HILL COMPANIES INC. $41 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 301.3 million; Market cap: $12.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.4%; TSINetwork Rating: Average; www.mcgraw-hill.com) gets 60% of its revenue from its Standard & Poor’s division, which provides financial information, including credit ratings on bonds. It gets 25% from publishing school textbooks. The remaining 15% comes from its media operations, which publish magazines and own nine television stations....