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
EBAY INC. $29 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $37.7 billion; Price-to-sales ratio: 3.7; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) has set up a new section of its online auction site for buying and selling gold and silver coins and bars. This new service has attracted many gold buyers, due to record gold and silver prices and eBay’s strong reputation. (Note that we still feel the best way to profit from rising gold is through well-established gold stocks like Newmont). As well, eBay should continue to profit as the sluggish economy prompts more people to sell goods online to supplement their incomes. eBay is a buy.
PETSMART INC. $41 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 113.4 million; Market cap: $4.6 billion; Price-to-sales ratio: 0.8; Dividend yield: 1.4%; TSINetwork Rating: Above Average; www.petsmart.com) is the biggest pet-supply chain in the U.S. In all, it operates 1,197 pet stores in the U.S. and Canada. It also has 185 in-store PetsHotels, which look after pets while their owners are away. PetSmart focuses on selling premium pet foods and other products that most supermarkets don’t carry, including its own line of private-label products. Even with the slow economy, premium pet food sales remain strong. That should make it easier for the company to pass along higher ingredient costs to its customers. As well, PetSmart separates itself from other retailers with exclusive brands, such as Martha Stewart pet-care products. The company also has a new deal to sell dog toys under the Toys R Us brand starting next year....
QUAKER CHEMICAL CORP. $30 (www.quakerchem.com) has paid $10.5 million for the 60% of its joint venture in Mexico that it did not already own. It may have to pay an additional $2 million in July 2012, depending on certain circumstances. To put these figures in context, Quaker earned $9.8 million, or $0.79 a share, in the second quarter of 2011. This purchase should help the company sell more specialty chemicals to its automotive and steel customers, which continue to expand in Mexico. Buy. FRONTIER COMMUNICATIONS CORP. $7.30 (www.frontier.com) earned $0.06 a share in three months ended June 30, 2011. That’s down 68.4% from $0.19 a share a year earlier. These figures exclude unusual costs related to Frontier’s July 2010 purchase of 4 million traditional phone accounts from Verizon. Because of this purchase, revenue jumped 156.2%, to $1.3 billion from $516.1 million. Strong demand for high-speed Internet and video services is offsetting slower demand for traditional phone services. Hold. CEDAR FAIR L.P. $18 (www.cedarfair.com) reported that attendance at its 11 amusement parks and seven water parks rose 5% in July 2011 compared with July 2010. As well, each park guest spent 2% more than a year ago. That should help Cedar Fair meet its target 2011 payout of $1.00 a unit, for a 5.6% yield. Buy.
MOSAID TECHNOLOGIES, $39.22, symbol MSD on Toronto, is now the subject of a takeover bid from Wi-LAN Inc. (symbol WIN on Toronto). The offer is for $38 a share in cash for all of Mosaid’s shares. Mosaid mainly licenses patented computer chip and telecommunications technology, including patents for technology used in smartphones and laptops. Mosaid is now trading at $39.22 a share, or 3.2% above Wi-LAN’s bid. This indicates that investors are anticipating a higher or rival offer....
GOOGLE INC., $490.92, Nasdaq symbol GOOG, is buying Motorola Mobility Holdings Inc. (New York symbol MMI). Motorola Mobility makes mobile phones and tablet computers that use Google’s Android operating system software. Google will pay $40.00 a share for Motorola Mobility, or a total of $12.5 billion. Google held cash of $39.1 billion, or $121.15 a share, on June 30, 2011, so it can easily afford this purchase. The company aims to close the transaction by the end of 2011. The purchase price is 63% more than Motorola Mobility’s trading price just prior to the takeover announcement. That’s why Google’s stock fell on the news. As well, investors are concerned that software specialist Google is buying a struggling manufacturing company. Moreover, Google has agreed to pay a $2.5-billion break-up fee to Motorola Mobility if the deal falls through....
NEW GOLD $11.97 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 428.8 million; Market cap: $5.3 billion) has three operating mines: the Mesquite mine in the U.S., the Cerro San Pedro mine in Mexico and the Peak mine in Australia. It also owns 30% of the El Morro copper/gold project in Chile (Goldcorp owns the other 70%) and 100% of the New Afton gold/copper/silver project in B.C. El Morro contains an estimated 4.7 million ounces of gold and 3.7 billion pounds of copper. New Afton holds 2.5 billion pounds of copper, 2.7 million ounces of gold and 8.3 million ounces of silver. In June 2010, New Gold bought Richfield Ventures (symbol RVC on Toronto) for $550 million in New Gold shares. Richfield owns the Blackwater gold property in central B.C., about 450 kilometres north of the New Afton project. Blackwater holds as much as 3.8 million ounces of gold. After it brings New Afton into production, New Gold aims to use the same mine-building personnel to construct a mine at Blackwater....
Today’s market turmoil is making many investors wonder if we face a replay of the 2007-2009 market plunge. However, I strongly doubt that we’ve set off on a new multi-year market decline. More likely, we are in a short-term setback — a “correction.” But nobody can consistently predict market trends. That’s why I continue to advise that you limit aggressive investments to no more than, say, 30% of your portfolio....
REITMANS (CANADA) LTD. $13.90 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384-1140; www.reitmans.com; Shares outstanding: 66.3 million; Market cap: $942.9 million; Dividend yield: 5.8%) owns 965 women’s clothing stores across Canada. The chain consists of 363 Reitmans, 160 Penningtons, 157 Smart Set, 122 Addition Elle, 73 Thyme Maternity, 67 RW & Co. and 23 Cassis stores. Reitmans continues to actively monitor its regional markets, and open and close stores as necessary. In the three months ended April 30, 2011, Reitmans’ earnings fell 98.3%, to $624,000, or $0.01 a share, from $37.3 million, or $0.23 a share, a year earlier. Sales were down 7.0%, to $219.3 million from $235.7 million. Same-store sales declined 8.7%....
CHIPOTLE MEXICAN GRILL $309.44 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 31.8 million; Market cap: $9.9 billion; No dividends paid) reported revenue of $571.6 million in the three months ended June 30, 2011. That’s up 22.4% from $466.8 million a year earlier. The company’s restaurants attracted more customers during the quarter. That pushed up its same-restaurant sales by 10.0%. Earnings per share rose 10.1%, to $1.63 from $1.48, on fewer shares outstanding. That’s mainly because the company’s food costs continue to rise, and it’s paying higher labour costs after it replaced illegal workers in the wake of a U.S. government probe of illegal immigrant hiring....
SHERRITT INTERNATIONAL $5.64 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.2 million; Market cap: $1.6 billion; Dividend yield: 2.7%) is a diversified natural-resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 376 megawatts of power-generation capacity in Cuba. Sherritt is a major nickel producer, with operations in Cuba and Canada. It is also close to finishing a mine at its 40%-owned Ambatovy project on the island nation of Madagascar, off Africa’s east coast. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. It is also Canada’s largest thermal coal producer. In the three months ended June 30, 2011, Sherritt’s revenue rose 23.2%, to $500.6 million from $406.3 million. Excluding one-time items, earnings per share rose 5.3%, to $0.20 from $0.19. Higher nickel sales, as well as higher prices for coal and oil, were the main reasons for the improved results. Cash flow per share rose 13.6%, to $0.50 from $0.44....