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
PEPSICO INC. $63 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $100.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pepsico.com) saw its sales jump 33.8% in 2010, to $57.8 billion from $43.2 billion in 2009. That’s mainly because of its 2010 purchases of its two main soft-drink bottling firms, Pepsi Bottling Group Inc. and PepsiAmericas Inc., for $7.8 billion in cash and shares. Without merger-related costs, PepsiCo’s 2010 earnings rose 14.2%, to $6.7 billion from $5.8 billion in 2009. Earnings per share rose 11.3%, to $4.13 from $3.71, on more shares outstanding. Combining plants and administrative functions should save the company $550 million a year by the end of 2012. That’s up from its original target of $400 million. These savings should help PepsiCo offset higher prices for corn and other ingredients at its snack-food operations....
SYMANTEC CORP. $18 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 763.2 million; Market cap: $13.7 billion; Price-to-sales ratio: 2.3; No dividends paid; TSINetwork Rating: Average; www.symantec.com) makes software that protects computers from viruses and electronic attacks. The popular Norton anti-virus program is the company’s best-known product. In the past few years, Symantec has expanded its corporate-security operations by purchasing other software companies. That has cut its exposure to cyclical home-computer sales. Big purchases fuelled growth ...
CEDAR FAIR L.P. $20 (www.cedarfair.com) lost $31.6 million, or $0.57 a unit, in 2010, mainly due to $98.1 million in charges related to the early repayment of debt and a writedown of fixed assets. In 2009, it earned $35.4 million, or $0.63 a unit. Revenue in 2010 rose 6.7%, to a record $977.6 million from $916.1 million, thanks to a 7.8% rise in attendance at its amusement parks. Hold. 3M COMPANY $90 (www.3m.com) has raised its dividend each year for the past 53 years. The new annual rate of $2.20 yields 2.4%. As well, 3M plans to buy back $7 billion of its shares, or 11% of the total outstanding. There is no time limit for these repurchases. Best Buy. QUAKER CHEMICAL CORP. $36 (www.quakerchem.com) has acquired privately held Summit Lubricants Inc., which makes specialty greases for military applications. The purchase price of $30 million is equal to 1.2 times the $24.9 million, or $2.19 a share, that Quaker earned in the nine months ended September 30, 2010. The new operations should add to its 2011 earnings. Buy....
FEDEX CORP., $98.32, New York symbol FDX, warned that severe winter weather and rising fuel costs are hurting its earnings. In its 2011 third quarter, which ends February 28, 2011, FedEx expects to earn $0.70 to $0.90 a share before unusual items. That’s down from its earlier earnings forecast of $0.95 to $1.15 a share. FedEx earned $0.76 a share in the year-earlier quarter. Even so, the company continues to see rising demand for its package-delivery services as the global economy recovers....
WYNDHAM WORLDWIDE CORP., $32.07, symbol WYN on New York, is the third-largest hotel company in the world, with 7,110 franchised hotels. It operates under a number of brands, including Wyndham Hotels and Resorts, Ramada, Days Inn, Super 8, Wingate by Wyndham, Baymont Inn & Suites, Microtel Inns & Suites, Hawthorn Suites, Howard Johnson, Travelodge, Knights Inn and Ameri-host Inn. In addition to hotels, Wyndham manages a number of vacation resorts, rental properties, luxury clubs and time-shares. This wide range of operations gives Wyndham more consistent cash flow than most of its competitors, who mainly focus on hotels. On November 30, 2010, the company bought James Villa Holidays, which owns 2,300 Mediterranean vacation rental properties. Wyndham now has 97,000 vacation rental properties worldwide....
BREAKWATER RESOURCES $6.61 (Toronto symbol BWR; TSINetwork Rating: Speculative) (416-363-4798; www.breakwater.ca; Shares outstanding: 70.4 million; Market cap: $465.6 million; No dividends paid) (All figures reflect a 1-for-10 consolidation in June 2010) mainly produces zinc. The company operates the Myra Falls mine in B.C., the Mochito mine in Honduras and the Toqui mine in Chile. Breakwater’s shares have jumped 223.5% from $2 in July 2010, along with higher zinc prices. Zinc is now trading around $1.13 U.S. a pound, up 57% from $0.72 last June, largely on higher Chinese industrial demand. Higher zinc prices helped Breakwater earn $0.28 a share in the three months ended September 30, 2010. That’s a big improvement over the $0.10 a share it earned a year earlier. Cash flow was $0.40 a share in the latest quarter....
SYMANTEC CORP. $18.33 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517- 8000; www.symantec.com; Shares outstanding: 789.3 million; Market cap: $14.5 billion; No dividends paid) makes software that protects computers from viruses and intruders. It also sells a range of products and services to businesses, including software and services for data backup and protection, as well as data-archiving to meet increasingly strict regulatory and compliance regulations. In the three months ended December 31, 2010, Symantec’s revenue rose 3.6%, to $1.6 billion from $1.5 billion a year earlier. The company earned $0.35 a share, down 12.5% from $0.40 a year earlier. However, that beat the consensus estimate of $0.33. Publicity around the WikiLeaks affair, involving the public release of often-embarrassing diplomatic cables, has made the company’s customers more security conscious. This should help Symantec sell more data security software, despite the slow pace of the U.S. economic recovery....
ACI WORLDWIDE $28.80 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 33.2 million; Market cap: $956.2 million; No dividends paid) makes software that is used to process transactions that involve credit cards, debit cards, smart cards, automated-teller machines, point-of-sale terminals and interbank payments. ACI has more than 800 clients in 88 countries. Customers include more than 100 of the world’s 500 largest banks and seven of the top 12 retailers in the U.S. In the three months ended December 31, 2010, ACI’s revenue rose 12.2%, to $141.2 million from $125.9 million a year earlier. The company earned $27.1 million, or $0.82 a share, in the latest quarter. That’s up 38.5% from $19.6 million, or $0.58 a share. ACI’s cash flow jumped 83.6%, to $45.8 million, or $1.38 a share, from $24.9 million, or $0.73 a share....
FORTRESS PAPER $62.32 (Toronto symbol FTP; TSINetwork Rating: Extra Risk) (1-888-820-3888; www.fortresspaper.com; Shares outstanding: 12.2 million; Market cap: $760.0 million; No dividends paid) has completed its purchase of the assets of the Bank of Canada’s Optical Security Material division. This division makes the material used in the security threads of various paper currencies, including Canadian currency. The purchase includes almost all of the division’s production equipment. Fortress will also retain key employees. No purchase price was given, but it plans to raise $57.5 million in a share issue to pay for the acquisition and other costs....
DELPHI ENERGY $2.05 (Toronto symbol DEE; TSI Network Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 112.7 million; Market cap: $231.1 million; No dividends paid) explores for oil and natural gas in Alberta, Saskatchewan and B.C. Gas makes up 81% of Delphi’s daily output; the remaining 19% is oil. In the three months ended September 30, 2010, Delphi’s average daily output rose 19.8%, to a record 8,114 barrels of oil equivalent (this measurement includes natural gas) from 6,773 barrels. The higher production pushed up Delphi’s cash flow by 19.7%, to $15.1 million from $12.6 million. Cash flow per share fell 18.8%, $0.13 from $0.16 a year earlier, on more shares outstanding....