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
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....
ALIMENTATION COUCHE-TARD $26.69 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard.com; Shares outstanding: 242.4 million; Market cap: $6.4 billion; Yield: 0.8%) is the largest convenience-store operator in Canada, with over 2,000 outlets. It also has over 3,500 U.S. stores. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. Couche-Tard sells fuel at over 68% of its stores. In the three months ended January 31, 2011, Couche-Tard’s earnings per share jumped 31%, to $0.38 from $0.29 a year earlier. (All figures except share price and market cap in U.S. dollars.) Sales rose 13.7%, to $5.6 billion from $4.9 billion. Same-store merchandise sales rose 3.9% in the U.S., and 0.4% in Canada. The company gets 77.9% of its sales from the U.S....
Another one of our buys —Breakwater Resources $7.42, symbol BWR on Toronto — has attracted a takeover bid. Breakwater is now the subject of a friendly, $663-million offer from Belgium-based Nyrstar, a major global producer of zinc and lead, as well as silver, gold and copper. Nyrstar’s 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....
ACI WORLDWIDE $29 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 33.9 million; Market cap: $967.4 million; No dividends paid) makes software used to process credit card, debit card, ATM, point-of-sale terminal and interbank payment transactions. ACI has more than 750 clients worldwide. Its customers include more than 100 of the world’s 500 largest banks and seven of the top 12 retailers in the U.S. 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....
RUSSEL METALS $23.27 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 59.8 million; Market cap: $1.4 billion; Dividend yield: 4.7%) earned $33 million, or $0.55 a share, in the three months ended March 31, 2011. That’s up sharply from $9.1 million, or $0.15 a share, a year earlier. Revenue rose 24.8% to $657.7 million from $526.8 million. Russel benefited from higher sales volumes and steel prices, and its profit margins improved. The company pays a quarterly dividend of $0.274 a share, for a high 4.7% yield....
BIRCHCLIFF ENERGY $13.66 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 127.7 million; Market cap: $1.7 billion: No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 76% of Birchcliff’s production is natural gas. The remaining 24% is oil. In the three months ended March 31, 2011, Birchcliff’s production jumped 70.5%, to 17,742 barrels of oil equivalent per day (including natural gas) from 10,407 barrels a year earlier. Cash flow per share rose 52.9%, to $0.26 from $0.17.The production increase and higher oil prices were the main reasons why Birchcliff’s cash flow rose....
TRILOGY ENERGY CORP. $23.75 (Toronto symbol TET; TSINetwork Rating: Speculative) (403-290-2900; www.trilogy.com; Shares outstanding: 114.6 million; Market cap: $2.7 billion; Dividend yield: 1.8%) produced an average of 25,362 barrels of oil equivalent per day (including natural gas) in the three months ended March 31, 2011. That was up 9.9% from 23,079 barrels a day a year earlier. However, cash flow per share fell 13.3%, to $0.39 from $0.45 a year earlier. Lower gas prices were the main reason for the decline. Still, the company continues to start up new wells. As a result, its daily production should jump to an average of 30,000 barrels for 2011. The company’s total debt is now $413.2 million. That’s a low 13.9% of its market cap. Trilogy trades at 9.7 times its 2011 forecast cash flow of $2.46 a share. The shares yield 1.8%....