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
PFIZER INC. $20 (New York symbol PFE; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 7.9 billion; Market cap: $158.0 billion; Price-to-sales ratio: 2.4; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.pfizer.com) is a major pharmaceutical maker. It also makes hospital and consumer products, and animal-health drugs. Pfizer sells its products in more than 150 countries; overseas sales account for about 57% of Pfizer’s total sales. Pfizer has a lot in common with AT&T. It, too, is facing falling sales in its older businesses, as patents on its top-selling drugs, such as Lipitor (for high cholesterol) expire. Like AT&T, Pfizer has used acquisitions to fuel its growth. That includes its big, $68-billion purchase of rival drug maker Wyeth in 2009, which gave it a number of promising new drugs, including Enbrel (psoriasis) and Zosyn (bacterial infections)....
On January 4, 2011, shareholders of the old Motorola Inc. received one share of Motorola Mobility for every eight Motorola shares they own. Following the distribution, the old Motorola changed its name to Motorola Solutions. It also consolidated its shares on a 1-for-7 basis, as many pension plans and institutional investors avoid stocks that trade below a certain price. Breakups like this help unlock hidden value, and generally lead to above-average results over time. We initially saw both stocks as buys, but we now prefer Motorola Solutions to Motorola Mobility. MOTOROLA SOLUTIONS INC. $46 (New York symbol MSI; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 339.5 million; Market cap: $15.6 billion; Price-to-sales ratio: 0.8; No dividends paid; TSINetwork Rating: Average; www.motorolasolutions.com) makes specialized equipment, such as bar-code scanners, and radios for police and fire vehicles....
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 convinced the U.S. Supreme Court to dismiss a class-action lawsuit that accused the retailer of paying female employees less than male workers. The ruling means that these claims can only proceed as individual cases, not as a single class-action lawsuit. That greatly reduces any possible damages that Wal-Mart might have to pay. Wal-Mart is a buy.
These three beverage makers face rising ingredient costs. However, all three have restructured their operations, and the resulting savings have put them in a better position to face these challenges. As well, their strong brands will help them pass higher costs on to their customers. Moreover, all three are expanding in fast-growing overseas markets. PEPSICO INC. $69 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $110.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pepsico.com) is the world’s second-largest soft-drink maker, after Coca-Cola. It also makes other products, such as Frito-Lay snack foods, Tropicana fruit juices and Quaker Oats. Last year, PepsiCo bought its two main bottling firms, Pepsi Bottling Group Inc. and PepsiAmericas Inc., for $7.8 billion in cash and shares. Starting in 2012, the company should save $550 million a year by merging plants and administrative functions....
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%)....