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
When investors see a day like Thursday, with a drop of more than 500 points in the Dow Jones Industrials, they can’t help but wonder if we face a replay of the 2007-2009 market plunge. However, though today’s situation could turn out badly, that’s not inevitable. It’s much different from a few years ago. The 2007-2009 drop was mostly about the collapse of the housing boom and everything that went with it. Today there is no boom that could deflate and bring down the economy. Today’s problem grows out of government attempts at ‘fixing’ the economy in recent years. These fixes, which were mostly unsuccessful, bloated government spending and created huge debts. Today’s main market worry is how the U.S. federal government will attempt to fix its budget deficit and bring its debt down to a manageable level. To top things off, the Obama administration has also brought in big changes in health care, union and environmental rules and so on. Some of these changes face court challenges and political opposition. But some are sure to survive and go into effect. Others are sure to follow....
When investors see a day like Thursday, with a drop of more than 500 points in the Dow Jones Industrials, they can’t help but wonder if we face a replay of the 2007-2009 market plunge. However, though today’s situation could turn out badly, that’s not inevitable. It’s much different from a few years ago. The 2007-2009 drop was mostly about the collapse of the housing boom and everything that went with it. Today there is no boom that could deflate and bring down the economy. Today’s problem grows out of government attempts at ‘fixing’ the economy in recent years. These fixes, which were mostly unsuccessful, bloated government spending and created huge debts. Today’s main market worry is how the U.S. federal government will attempt to fix its budget deficit and bring its debt down to a manageable level. To top things off, the Obama administration has also brought in big changes in health care, union and environmental rules and so on. Some of these changes face court challenges and political opposition. But some are sure to survive and go into effect. Others are sure to follow....
TUPPERWARE BRANDS CORP., $62.49, New York symbol TUP, makes high-quality household products, including plastic food and beverage containers and educational toys. It also makes wide range of cosmetics, bath oils and fragrances. Tupperware reported better-than-expected quarterly earnings this week. However, the company makes many of its products from oil-based plastic resins, and the cost of these materials is rising. That will probably slow Tupperware’s earnings growth in the second half of 2011. That caused the stock to fall 12%. In the three months ended July 2, 2011, Tupperware’s sales rose 18.5%, to $669.9 million from $565.1 million a year earlier. The company gets over 70% of its sales from outside the U.S. If you exclude the positive impact of currency-exchange rates, sales would have risen 9% in the latest quarter. Earnings rose 34.4%, to $1.25 a share from $0.93. That beat the consensus estimate of $1.18 a share....
ACI WORLDWIDE, $36.17, symbol ACIW on Nasdaq, makes software used to process transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments. In March 2011, ACI bought ICD Corp. for an undisclosed amount. ICD has over 140 customers who use its software to authorize credit- and debit-card transactions through over 70 different payment processors, including banks and credit-card companies. ACI’s revenue rose 22.7% in the three months ended June 30, 2011, 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, a year earlier. The company holds cash of $170.8 million, or $4.98 a share....
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....