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.
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Growth Stocks Library Archives
MTS SYSTEMS CORP. $45 (Nasdaq symbol MTSC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.3 million; Market cap: $688.5 million; Price-to-sales ratio: 1.7; Dividend yield: 1.8%; TSINetwork Rating: Average; www.mts.com) makes equipment and software that tests materials, machines and structures. This helps manufacturers lower their costs and improve the quality of their products. The company is starting to see rising demand for its products as the economy recovers. In its 2011 first quarter, which ended January 1, 2011, MTS’s sales rose 19.0%, to $105.9 million from $89.0 million a year earlier. Earnings jumped 246.3%, to $13.3 million from $3.8 million. Earnings per share rose 273.9%, to $0.86 from $0.23, on fewer shares outstanding. That’s mainly because it is selling more products with high profit margins. As well, MTS set aside less money to cover potential warranty claims....
PLEASE NOTE: We’ve put six sell recommendations, and our reasons for those recommendations, in the latest issue of Wall Street Stock Forecaster. Here are the sells: Harte-Hanks Inc., New York symbol HHS Liz Claiborne Inc., New York symbol LIZ...
CHIPOTLE MEXICAN GRILL, $266.79, symbol CMG on New York, is a Denver-based Mexican-restaurant chain. In the three months ended March 31, 2011, Chipotle’s revenue rose 24.3% to $509.4 million from $409.7 million a year earlier. The company’s restaurants attracted more customers during the quarter. That pushed up its same-restaurant sales by 12.4%. Chipotle also opened 12 new restaurants. It now has a total of 1,095 locations. Earnings rose 22.5%, to $46.4 million from $37.8 million. Earnings per share rose 24.2%, to $1.49 from $1.20, on fewer shares outstanding. The company holds cash of $282.9 million, or $9.10 a share, and has no debt....
We’re always on the lookout for new stocks that we feel offer conservative investors strong growth with limited risk. International Flavors & Fragrances (this issue), is a good example. At the same time, we constantly monitor our current recommendations...
As part of our three-pronged investing approach, we’ve long recommended that you downplay stocks that are in the broker/media limelight. (We also recommend that you invest mainly in well-established, dividend-paying companies, and spread your investments out across the five main economic sectors.) International Flavors & Fragrances is a good example of a well-established, dividend-paying stock that gets little media attention. It began operating in 1909, and has played a vital role in developing some of the world’s top-selling foods and consumer products. We feel IFF’s close relationships with its clients will continue to fuel its growth, particularly in emerging markets. As well, the company’s high research spending is a hidden asset....
TUPPERWARE BRANDS CORP. $63 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 62.6 million; Market cap: $3.9 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.tupperwarebrands.com) is another example of a well-established consumer-products stock that gets little media attention. Like IFF (this issue), Tupperware also has a long history of steady dividends. Starting next year, the company will increase its annual dividend rate in line with increases in its earnings. Meanwhile, Tupperware continues to see strong demand for its plastic food containers and beauty products, particularly in fast-growing countries like Brazil, Indonesia and Turkey....
These four small industrial companies should continue to benefit as the global economy grows. They are also market leaders, and their shares trade at attractive multiples to earnings. They also kept paying dividends during the recession. However, only two are buys right now. BRIGGS & STRATTON CORP. $23 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 50.3 million; Market cap: $1.2 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is the world’s largest lawnmower engine maker. This business accounts for 62% of Briggs’sales. It gets the remaining 38% of its sales by making other home and garden equipment, such as generators, pressure washers and snow blowers. The weak U.S. economy has weighed on Briggs’ sales. In response, the company recently closed a plant in Wisconsin. Due to $4.6 million in restructuring and refinancing charges, Briggs lost $1.3 million, or $0.03 a share, in its second quarter, which ended December 26, 2010. A year earlier, it earned $3.0 million, or $0.06 a share....
INTERNATIONAL BUSINESS MACHINES CORP. $170 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $204.0 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.ibm.com) has raised its quarterly dividend by 15.4%, to $0.75 a share from $0.65. The new annual rate of $3.00 yields 1.8%. This is the 16th consecutive year that IBM has raised its dividend. The computer maker also plans to buy back $8 billion of its common shares. Combined with $4.7 billion remaining on its previous authorization, IBM can now buy back $12.7 billion of its stock. That’s equal to 6% of its market cap. IBM is a buy.
EBAY INC. $34 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $44.2 billion; Price-to-sales ratio: 4.7; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) is paying an undisclosed sum for privately held where.com, which gives mobile-phone users listings for nearby restaurants and shops. That allows advertisers to offer special deals to people who are near their businesses. eBay plans to integrate its PayPal e-commerce system with where.com’s mobile-phone software. That will let customers use their phones to electronically pay for goods and services offered by where.com’s clients. eBay aims to complete this purchase by the end of June 2011. eBay is a buy.
Fast-food companies like McDonald’s, Yum Brands and Tim Hortons (this issue) face rising labour and food costs. However, their well-known brands make it easier for them to pass along higher costs to their customers, and keep raising their dividends. International expansion further enhances their prospects. MCDONALD’S CORP. $78 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.0 billion; Market cap: $78.0 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.mcdonalds.com) is the world’s largest fast-food restaurant chain by revenue. It has 32,800 restaurants that mainly serve hamburgers and french fries. Franchisees own 80% of these outlets. McDonald’s gets 65% of its sales from overseas. The company continues to profit from new menu items, such as breakfast oatmeal. As well, its premium coffees are helping it compete with Starbucks....