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
PASON SYSTEMS $14.75 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 81.5 million; Market cap: $1.2 billion; Dividend yield: 2.4%) rents equipment that its customers use to monitor and manage land-based oil rigs. It also sells communications systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. The company serves oil and gas companies and drilling contractors throughout Canada, the U.S., Mexico and Argentina. In the three months ended December 31, 2010, Pason’s revenue jumped 79.2%, to $73.5 million from $41.0 million a year earlier. Earnings climbed 232.0%, to $8.2 million, or $0.10 a share. A year earlier, it earned $2.5 million, or $0.03 a share. Cash flow per share more than doubled, to $0.34 from $0.15. That’s mainly because its oil and gas customers increased drilling in the U.S., and Pason raised its selling prices. Pason holds cash of $110.4 million, or $1.35 a share, and has no long-term debt....
FAIR ISAAC $27.90 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 41.7 million; Market cap: $1.2 billion; Dividend yield: 0.3%) plans to cut spending, including laying off 9% of its workforce and combining facilities. In all, these moves will cost the company $10 million, or $0.18 a share. However, savings from this plan should lift its fiscal 2011 earnings per share to around $1.95 from its earlier estimate of $1.66 (Fair Isaac’s fiscal fiscal year ends September 30). The stock trades at 14.3 times the new estimate. Fair Isaac’s long-term outlook is positive. But it needs the global economy to strengthen further to increase its revenue and earnings. As well, governments are increasingly regulating banks and credit-card issuers. That could hurt its sales to its biggest customers....
INTERNATIONAL ROAD DYNAMICS $0.62 (Toronto symbol IRD; SI Rating: Speculative) (306-653-6600; www.ird.ca; Shares outstanding: 14 million; Market cap: $8.7 million; No dividends paid) reports that its sales fell 16.4% in the three months ended November 30, 2010, to $10.7 million from $12.8 million a year earlier. The drop was due mainly a stronger Canadian dollar, which pushed down the company’s U.S. sales by 36.8%, to $4.8 million from $7.6 million. In Canada, sales rose 58.3% in the latest quarter. In the quarter, the company lost $335,000, or $0.03 per share, compared to earnings of $337,000, or $0.03 per share a year earlier. The lower sales were the main reason for the earnings decline. International Road Dynamics is still a buy....
AMAZON.COM $164.70 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 448.8 million; Market cap: $73.9 billion; No dividends paid) will now offer free streaming of movies and TV shows to its Amazon Prime members. These customers pay $79 a year to get unlimited two-day shipping. The company will offer Prime members more than 5,000 movies and TV shows. Netflix (New York symbol NFLX), Amazon’s rival in the Internet movie market, offers about 30,000 movies and TV shows for $96 a year. Amazon’s new service will reward Prime members. As well, it will draw attention to the company’s movie and TV-show downloading service, Amazon Instant Video, which lets customers buy or rent more than 90,000 commercial-free movies and TV shows (with prices of up to $3.99 for new releases)....
TOROMONT INDUSTRIES LTD. $30.49 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 76.9 million; Market cap: $2.3 billion; Dividend yield: 2.1%) has two divisions: the equipment group and the compression group. In the three months ended December 31, 2010, Toromont’s revenue jumped 56.7%, to $709.7 million from $452.8 million a year earlier. The increase was mostly due to its January 2010 purchase of Enerflex Systems Income Fund for $700 million. Enerflex brought new oil and gas compression customers to Toromont. It also expanded Toromont’s international presence. Even so, the company’s earnings per share fell 2.1%, to $0.47 from $0.48. The cost of integrating Enerflex held back earnings....
INTERNATIONAL BUSINESS MACHINES CORP., $162.43, New York symbol IBM, hit a new all-time high of $167.72 this week after the company confirmed its goal to double its earnings and add $20 billion to its annual sales of $100 billion by 2015. A big part of this growth will come from new technologies like “cloud computing” That’s where data and software are kept on one or more centralized servers. Users connect to these servers over the Internet through a variety of devices. IBM feels that cloud-computing services will generate annual revenue of $7 billion by 2015. The company’s strong reputation and new products will also help it expand in fast-growing markets, such as China, India and Brazil. By 2015, IBM feels these markets will supply 30% of its overall revenue....
YAMANA GOLD, $12.36, symbol YRI on Toronto, has entered into an agreement with Goldcorp Inc. (Toronto symbol G) and Switzerland-based Xstrata plc. Under the deal, Yamana will sell its 100%-owned Agua Rica copper/gold property in Argentina to mining firm Minera Alumbrera. Agua Rica is about 35 kilometres from the producing Alumbrera mine. This mine is owned by Minera Alumbrera, which is currently owned 50% by Xstrata, 37.5% by Goldcorp and 12.5% by Yamana. In exchange for Agua Rica, Yamana (which will still own 12.5% of the project through Minera Alumbrera) will get payments totalling $110 million over three years, plus a further $150 million when construction begins on a mine, and an additional $50 million when the mine goes into production. Yamana will also get a revenue stream equal to 65% of the gold produced as a by-product of the mainly copper deposit, to a maximum of 2.3 million ounces at spot prices minus $450 U.S. an ounce....
APPLE INC., $360.00, Nasdaq symbol AAPL, gained 3% this week after the company unveiled its new iPad tablet computer. Called the “iPad 2,” this new device is thinner and more powerful than the first iPad. Apple has been selling the original iPad for less than a year. The device now supplies 15% of the company’s revenue. Apple faces rising competition in the tablet computer market. That’s because other companies, such as Research in Motion and Motorola Mobility (see below) are launching new tablets this year....
WESTJET AIRLINES, $15.48, symbol WJA on Toronto, has just signed a code-sharing agreement with American Airlines. Under these agreements, two airlines co-operate on flights and baggage handling. Last year, WestJet entered into its first code-sharing deal with Cathay Pacific. Initially, WestJet will only connect with American Airlines flights to Chicago and Boston. However, it expects to eventually connect with American Airlines flights that go all across the U.S. Code-sharing agreements are especially valuable for attracting business passengers. That’s because these agreements let customers seamlessly connect between flights and gain frequent-flyer points for the entire distance travelled....
HEWLETT-PACKARD CO., $42.68, New York symbol HPQ, reported better-than-expected earnings this week. However, sales fell short of expectations, due to slowing consumer demand for computers. That’s why the stock fell 12%. In its 2011 first quarter, which ended January 31, 2011, Hewlett’s earnings rose 16.8% to $3.0 billion from $2.6 billion a year earlier. Hewlett spent $2.3 billion on share buybacks during the quarter. Because of fewer shares outstanding, earnings per share rose 27.1%, to $1.36 from $1.07. These figures exclude unusual items, such as costs to integrate recent acquisitions. On this basis, the latest earnings beat the consensus earnings estimate of $1.29 a share. Sales rose 3.6% in the latest quarter, to $32.3 billion from $31.2 billion. That was just short of the consensus sales estimate of $33 billion. Sales at the Personal Systems Group, which accounts for 32% of Hewlett’s total sales, fell 1.3%. That’s because an 11% jump in sales to businesses failed to offset a 12% drop in sales to consumers....