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 FLAVORS & FRAGRANCES INC. $63 (New York symbol IFF; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 80.3 million; Market cap: $5.1 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.iff.com) makes compounds that improve the taste of food and the smell of a variety of consumer products. In the three months ended March 31, 2011, sales rose 9.2%, to $714.3 million from $653.9 million a year earlier. Excluding a charge due to a plant closure in Europe in the year-earlier quarter, earnings per share would have risen 21.2%, to $1.03 from $0.85. IFF’s sales continue to rise in emerging markets, where more people can now afford packaged foods and scented products. It is also profiting from rising demand for more appealing foods in North America and other developed markets....
CANON INC. ADRs $46 (New York symbol CAJ; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.3 billion; Market cap: $59.8 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.canon.com) suffered little damage from the March earthquake and tsunami in Japan. Production of its printers, digital cameras and other equipment has nearly returned to normal levels. Meanwhile, Canon reported that its sales rose 24.5% in the three months ended March 31, 2011, to $10.1 billion from $8.1 billion a year earlier. However, costs related to the integration of an acquisition cut earnings to $0.54 per ADR from $0.55 (each American Depositary Receipt represents one common share). Canon is a buy.
Prices of many commodities have moved down from their recent peaks on concerns about the global economic recovery. Rather than selling, the best way to cut your risk in the volatile resource sector is to stick with well-established mining companies with high-quality reserves like Newmont, Alcoa and BHP. As well, these firms mainly operate in politically stable areas, like North America and Australia. NEWMONT MINING CORP. $54 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 493.7 million; Market cap: $26.7 billion; Price-to-sales ratio: 3.0; Dividend yield: 1.5%; TSINetwork Rating: Average; www.newmont.com) gets 85% of its revenue from its gold mines in the U.S., Canada, Mexico, Australia, New Zealand, Peru, Indonesia and Ghana. The remaining 15% comes from copper, silver, zinc and other metals....
BHP BILLITON LTD. ADRs $90 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.7 billion; Market cap: $243.0 billion; Price-to-sales ratio: 3.6; Dividend yield: 2.0%; TSINetwork Rating: Average; www.bhpbilliton.com) plans to spend $80 billion over the next five years on several new growth projects....
APPLE INC. $322 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 924.8 million; Market cap: $297.8 billion; Price-to-sales ratio: 3.4; No dividends paid; TSINetwork Rating: Average; www.apple.com) has agreed to settle a long-running patent dispute with rival cellphone maker Nokia Corp. (New York symbol NOK). The company did not reveal the details of the settlement. However, it will likely make a one-time payment of several million dollars. In addition, Apple will probably pay Nokia a royalty based on future iPhone sales. As well, the company will soon launch iCloud, a new free service that will let users store music, videos and other files on remote servers. Users can then access these files over the Internet through iPhones and other Apple devices. Apple believes iCloud will spur sales of iPods, iPhones and iPads, as well as sales of music and movies from its iTunes online store....
PHILIPS ELECTRONICS N.V. ADRs $23 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $23.0 billion; Price-to-sales ratio: 0.7; Dividend yield: 4.7%; TSINetwork Rating: Average; www.philips.com) is transferring its struggling television manufacturing operations to a new joint venture with Hong Kong-based TPV Technology. The company will own 30% of this joint venture, which will make TV sets under the Philips brand. Philips expects to close the deal by the end of 2011. The company earned 0.14 euros per ADR in the three months ended March 31, 2011 (1 euro = $1.40 Canadian; each American Depositary Receipt represents one Philips common share.) That’s down 36.4% from 0.22 euros per ADR a year earlier, mainly due to the losses at the TV operations. Sales rose 5.5% in the quarter, to 5.3 billion euros from 5.0 billion euros. All three of Philips’ businesses contributed to the higher sales: health-care equipment (up 8.2%), lighting (up 5.1%), and consumer products, such as electric shavers (up 4.5%)....
MACY’S INC. $28 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 426.8 million; Market cap: $12.0 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.4%; TSINetwork Rating: Average; www.macysinc.com) has rebounded strongly since falling to below $7 in March 2009. That’s mainly due to the success of its “My Macy’s” strategy, which lets managers at its 810 Macy’s and 41 Bloomingdale’s department stores customize their merchandise to local tastes. The company’s sales fell 12.9%, from $27.0 billion in 2007 to $23.5 billion in 2010 (fiscal years end January 31). In 2011, the first full year of the My Macy’s initiative, sales rose 6.4%, to $25.0 billion. Same-store sales rose 4.6% in 2011. That’s a big improvement over 2010’s 5.3% decline....
C.R. BARD INC. $109 (www.crbard.com) has raised its quarterly dividend by 5.6%, to $0.19 a share from $0.18. The new annual rate of $0.76 yields 0.7%. The medical-device maker has now raised its dividend each year for the past 38 years. Buy. WEYERHAEUSER CO. $21 (www.weyerhaeuser.com) earned $3 million, or nil per share, in the three months ended March 31, 2011. That’s a big improvement over the $15 million, or $0.07 a share, that it lost a year earlier. These figures exclude unusual items, such as gains on sales of timberlands. Sales rose 11.2%, to $1.6 billion from $1.4 billion. Higher Chinese lumber demand helped offset lower new housing starts in the U.S. Hold. 3M COMPANY $93 (www.3m.com) makes over 55,000 consumer and industrial products. The company continues to spend around 5.5% of its sales on research. Thanks to a steady stream of new products, 3M expects its sales to rise by 7% to 8% a year. That’s well above its historical growth rate of 4% a year. Buy.
J.C. PENNEY CO. INC., $34.29, New York symbol JCP, jumped 15% this week after it named Ron Johnson as its new chief executive officer, effective November 1, 2011. Mr. Johnson helped develop computer maker Apple Inc.’s hugely successful retail stores. Shoppers have shifted away from department stores and toward specialty retailers in the past few years. The new CEO should help Penney remodel its stores to attract younger shoppers. In addition, he will probably focus on improving Penney’s customer service, as he did with Apple. J.C. Penney is a buy....
BREAKWATER RESOURCES, $7.41, symbol BWR on Toronto, is now the subject of a $663-million friendly takeover bid from Belgium-based Nyrstar, a major global producer of zinc and lead, as well as silver, gold and copper. The offer is for $7.00 a share in cash for all of Breakwater’s shares. In addition, Breakwater shareholders will get a special dividend of $0.50 a share in cash. At $7.50, that’s up 155% from the $2.94 we recommended the stock at a year ago in our July 2010 issue of Stock Pickers Digest....