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
Newell Rubbermaid dropped over 20%, from $18 to $14, in early June 2011, after it warned that slowing demand for its household goods, particularly in the U.S., are hurting its sales growth. We see this is a temporary setback, as Newell has a number of advantages that will help it rebound and thrive. For one, it has huge potential to expand in fast-growing markets, like Asia and Latin America (right now, it gets just 30% of its sales from outside North America). Moreover, its strong brands will give it an edge in attracting new customers as it expands into new markets. In addition, it continues to realize big savings from its multi-year restructuring plan, which has cut its manufacturing capacity by 60% since its 1999 purchase of Rubbermaid Inc. These savings are helping Newell deal with rising costs for plastic resins made from oil, a key raw material. As well, the lower costs are freeing up more cash that Newell can use to to develop and promote new, more-profitable products....
GOOGLE INC. $607 (Nasdaq symbol GOOG; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 322.3 million; Market cap: $195.6 billion; Price-to-sales ratio: 6.0; No dividends paid; TSINetwork Rating: Above Average; www.google.com) operates the world’s leading Internet-search engine. The company’s search dominance helps it sell ads on its web sites and on sites owned by others. Ads now account for 97% of Google’s revenue. Google continues to expand rapidly. It now offers a range of other services, such as Gmail (email), YouTube (video sharing) and Google Chrome (web browser). These services help draw more users to Google’s sites. That lets it sell more ads and charge higher ad rates. The company recently launched two new services that should continue to fuel its growth: Its Android smartphone operating system will help it profit as more people access the Internet through mobile devices instead of computers. As well, its new Google+ social-networking site has already attracted over 20 million users since late June 2011. At this rate, it could soon rival market-leader Facebook, which has 750 million users....
These three industrial stocks continue to benefit from recent restructurings, which put them in a better position to weather the cyclical markets they serve. As well, lower costs will keep fuelling their earnings as demand continues to recover. Their stronger balance sheets will also let them expand by purchasing related companies. Moreover, all three trade at reasonable multiples to earnings, and have long histories of paying dividends. GENUINE PARTS CO. $53 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing sector; Shares outstanding: 157.3 million; Market cap: $8.3 billion; Price-to-sales ratio: 0.7; Dividend yield: 3.2%; TSINetwork Rating: Average; www.genpt.com) distributes auto parts to over 4,800...
FORD MOTOR CO. $12 (New York symbol F; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 3.8 billion; Market cap: $45.6 billion; Price-to-sales ratio: 0.4; No dividends paid since June 2006; TSINetwork Rating: Speculative; www.ford.com) sold 1.5 million cars and trucks in the three months ended June 30, 2011. That’s up 7.1% from 1.4 million a year earlier. The higher sales are largely due to the success of several new models. The company has 16.7% of the U.S. auto market, unchanged from a year earlier. In Europe, Ford’s market share rose to 8.4% from 7.9%. However, the extra costs to develop these new cars and trucks, along with higher prices for steel and plastics, caused Ford’s earnings to fall 7.7%, to $2.4 billion, or $0.59 a share. It earned $2.6 billion, or $0.61 a share, a year earlier. Revenue rose 13.4%, to $35.5 billion from $31.3 billion. The company expects its earnings in the second half of 2011 to be lower than the first half. Even so, Ford’s new cars should continue to increase its sales, particularly overseas....
GENERAL ELECTRIC CO. $18 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.6 billion; Market cap: $190.8 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.ge.com) is seeing rising demand for consumer and business loans at GE Capital, its finance division. That’s helping the company offset slower growth at its industrial businesses, which make a variety of products, including jet engines, turbines and locomotives. In the three months ended June 30, 2011, GE Capital’s earnings jumped 117.0%, to $1.6 billion from $734 million a year earlier. That helped push up GE’s overall earnings by 10.5% in the quarter, to $3.5 billion, or $0.33 a share. A year earlier, it earned $3.2 billion, or $0.29 a share. Revenue fell 3.5%, to $35.6 billion from $36.9 billion. However, that’s partly because the company sold 51% of its NBC Universal entertainment business in February 2011. If you exclude the impact of this sale, revenue from GE’s ongoing businesses would have risen 7%....
CINTAS CORP. $33 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 137.6 million; Market cap: $4.5 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.cintas.com) gets 70% of its revenue by supplying uniforms to businesses. The remaining 30% comes from selling other business services and products, such as doormats, restroom supplies, document shredding, and fire alarms and extinguishers. It has over 800,000 clients, mainly in North America. The company’s revenue is improving with the overall economy. As well, Cintas has expanded its salesforce. That’s helping it win new clients and sell more services to its existing customers. As a result, Cintas’s revenue rose 7.4% in the fiscal year ended May 31, 2011, to $3.8 billion from $3.5 billion in fiscal 2010....
Unusual weather can cause big swings in gas and electricity demand. That can have a major impact on the earnings of Ameren and Alliant. Even so, their regulated businesses face little competition, and will continue to give them plenty of steady cash flows for dividends. Still, only one is a buy right now. AMEREN CORP. $30 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 241.1 million; Market cap: $7.2 billion; Price-to-sales ratio: 0.9; Dividend yield: 5.1%; TSINetwork Rating: Average; www.ameren.com) sells electricity and natural gas to 3.4 million customers in Illinois and Missouri. In the three months ended March 31, 2011, Ameren’s earnings fell 30.4%, to $71 million from $102 million a year earlier. Earnings per share fell 32.6%, to $0.29 from $0.43, on more shares outstanding. If you exclude unusual items, mainly gains on fuel-hedging contracts, earnings per share would have fallen 37.5%, to $0.25 from $0.40. The company had to repair storm damage, and paid higher coal prices; these were the main reasons for the lower earnings....
WAL-MART STORES INC. $53 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.5 billion; Market cap: $185.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.walmart.com) has started streaming high-definition movies through its web site. Customers can either rent or buy these films. Demand for movie-streaming services is growing strongly. This new service will help Wal-Mart offset slowing sales of regular DVDs. Wal-Mart is a buy.
BROADRIDGE FINANCIAL SERVICES INC. $23 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 123.4 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.6%; TSINetwork Rating: Average; www.broadridge.com) has been chosen by Charles Schwab Corp. (Nasdaq symbol SCHW) to help operate a new online service that will let Schwab’s customers trade stocks and currencies in 12 foreign markets. Schwab plans to launch this service next year. Broadridge will provide the technology to process the currency trades, and handle accounting and reporting. Schwab is the world’s largest online brokerage firm. Broadridge could benefit further as Schwab expands its services for investing in international markets....
NCR CORP. $20 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 158.6 million; Market cap: $3.2 billion; Price-to-sales ratio: 0.7; No dividends paid; TSINetwork Rating: Average; www.ncr.com) has developed a new self-serve kiosk that will help immigrants to the U.S. fill out government forms. The machines will help users save time, and will be much cheaper than using an immigration consultant. ClearPath Inc., a private firm founded by former U.S. immigration officials, will supply the software for the kiosks. The U.S. government receives more than 100 million immigration forms each year, so these kiosks could see strong demand. The company will install the first five machines in stores that provide financial services to new immigrants in Houston, Texas....