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
INTERNATIONAL BUSINESS MACHINES CORP., $181.63, New York symbol IBM, reported higher-than-expected earnings for the latest quarter. However, the computer maker’s revenue fell short of expectations. That caused the stock to fall 5% this week. In the three months ended September 30, 2011, IBM earned $3.8 billion. That’s up 7.0% from $3.6 billion a year earlier. The company spent $3.4 billion on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 13.1%, to $3.19 from $2.82. If you exclude unusual items, mainly costs to integrate acquisitions, IBM’s earnings per share would have risen 15.1%, to $3.28 from $2.85. On this basis, the latest earnings beat the consensus estimate of $3.22 a share. Revenue rose 7.8%, to $26.2 billion from $24.3 billion. That was less than the consensus estimate of $26.3 billion. If you exclude the positive impact of foreign-exchange rates, revenue would have risen 3%....
REITMANS, $14.60, symbol RET.A on Toronto, has decided to close its 25 Cassis stores. The company will then add these outlets to its other chains. Cassis is the newest of Reitmans’ banners. The company launched the chain in 2006. Its stores, which average 3,400 square feet, are located in major malls. Cassis sells business-casual clothing for women in their forties. Cassis supplies less than 2% of Reitmans’ yearly sales. However, the company will take a one-time charge of $4 million (after tax) in the current quarter to write down Cassis’ assets and pay severance to laid-off employees....
INTACT FINANCIAL CORP. $57.06 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341-1464; www.intactfc.com; Shares outstanding: 109.4 million; Market cap: $6.2 billion; Dividend yield: 2.6%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power. Intact has two product lines: its personal products, which contribute 70% of its premiums, include automobile and property insurance that Intact sells to individuals. Commercial products provide 30%, and include auto, property, liability, surety and specialty coverage that Intact mainly sells to small- and medium-sized businesses. In the three months ended June 30, 2011, Intact’s sales rose 2.7%, to $1.35 billion from $1.32 billion. Earnings per share fell 8.2%, to $1.12 from $1.22 a year earlier. However, the decline was mainly the result of catastrophic claims related to the Slave Lake, Alberta, wildfires and worse-than-usual spring storms. Those losses were partly offset by strong results from the company’s auto insurance business....
Yellow Media $0.22, symbol YLO on Toronto (formerly Yellow Pages Income Fund) has collapsed from around $6 at the start of this year to pennies, and has quit paying dividends. When Yellow Media first sold units to the public in 2003, many investors thought Yellow was a well-established company. In fact, it was more like an unwanted, over-the-hill business. In our view, it was just another new issue. As long-time readers know, we advise staying out of virtually all new issues. They come to market when it’s a good time for the company or its insiders to sell, and that almost always isn’t a good time for you to buy....
LEON’S FURNITURE LTD. $11.94 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 69.9 million; Market cap: $834.6 million; Dividend yield: 3.0%) has built its chain of over 72 furniture stores on its four main strengths: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; strong after-sales service; and aggressive TV, radio and print advertising. In the three months ended June 30, 2011, Leon’s sales fell 3.0%, to $163.9 million from $169.0 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales. Earnings fell 9.4%, to $9.8 million, or $0.14 a share, from $11.4 million, or $0.16 a share. The slower sales were the main reason for the earnings decline. The company also spent more on advertising....
BIRCHCLIFF ENERGY $14.10 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 126.5 million; Market cap: $1.8 billion: No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. Birchcliff has hired advisors to help sell the company after it received expressions of interest from a number of parties. These potential buyers could include Asian investors. Right now, Birchcliff’s management owns 5% of the company. Prominent Toronto investor Seymour Schulich is Birchcliff’s largest shareholder, with a 26% interest....
CALIAN TECHNOLOGIES $18.91 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 7.7 million; Market cap: $145.6 million; Dividend yield: 5.3%) operates in two areas: the business and technology services division (which supplies 74% of Calian’s revenue) provides engineers, health-care workers and other skilled professionals to clients on a contract basis. The systems engineering division (26% of revenue) sells hardware and software used for testing, operating and managing satellite and other communication systems. In the three months ended June 30, 2011, Calian’s revenue rose 1.7%, to $58.5 million from $57.6 million a year earlier. Earnings fell 10.2%, to $3.5 million from $3.8 million. Earnings per share fell 8.2%, to $0.45 from $0.49, on fewer shares outstanding. Calian earned high profit margins on the business and technology service division’s contracts. However, that wasn’t enough to offset weaker earnings at the systems engineering division, due to the strong Canadian dollar....
WESTJET AIRLINES $12.60 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 139.4 million; Market cap: $1.8 billion; No dividends paid) has just signed an interline agreement with Dubai’s Emirates airline. Under these agreements, two airlines cooperate on flights and baggage handling. WestJet has similar arrangements with Air France, China Airways of Taiwan, China Eastern, Alitalia, Korean Air, Australia’s Qantas Airlines, Japan Airlines, Hong Kong-based Dragonair and El Al Israel. Interline deals can become code-sharing agreements. These are similar to interline pacts, but they also let airlines sell seats and move luggage under their own names onto another carrier’s flights. WestJet has codesharing deals with Cathay Pacific, KLM and American Airlines....
ACI WORLDWIDE $28.35 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 34.3 million; Market cap: $972.4 million; No dividends paid) makes software that is used to process transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments. ACI has just bought S1 Corp. for $540 million in cash and stock. S1 sells transaction software for banks, credit unions, retailers and other processors. The company has over 3,000 clients worldwide. In the three months ended June 30, 2011, ACI’s revenue rose 22.7%, to $113.4 million from $92.4 million a year earlier. The company earned $9.8 million, or $0.29 a share, compared to a loss of $150,000, or nil per share. ACI holds cash of $170.8 million, or $4.98 a share....
AMAZON.COM $231.53 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 460.0 million; Market cap: $106.5 billion; No dividends paid) has unveiled new models of its Kindle electronic-book reader, including the Kindle Fire, the company’s first tablet computer. The Kindle Fire features a seven-inch, full colour touch-screen display. It is smaller and has less memory than the top-selling Apple iPad, but it will cost just $199 U.S., compared to $499 U.S. for an iPad. The tablet computer market is fiercely competitive. However, the Kindle Fire’s lower price should help it compete with the iPad and give it an advantage over non-Apple tablets. As well, users will be able to easily buy and download e-books, music, movies and games from Amazon’s web site. The company will also let Kindle Fire users keep their content on its cloud storage service at no extra cost....