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
PROCTER & GAMBLE CO., $60.02, New York symbol PG, is one of the world’s largest makers of household and personal-care products. Some of its top brands include Tide detergent, Crest toothpaste, Head & Shoulders shampoo and Pampers diapers. In its 2010 fiscal year, which ended June 30, 2010, Procter earned $10.9 billion. That’s up 2.5% from $10.7 billion in fiscal 2009. The company spent $6.0 billion on share buybacks in the latest year. Because of fewer shares outstanding, earnings per share rose 4.1%, to $3.53 from $3.39. Without unusual items, including gains on the sale of its prescription-drug division, Procter would have earned $3.67 a share in fiscal 2010. That’s 5.8% higher than the $3.47 a share it earned in fiscal 2009. Despite the gain, the latest earnings fell short of the consensus estimate of $3.89 a share. That caused the stock to fall 3% this week....
WESTJET AIRLINES, $13.04, symbol WJA on Toronto, has reported higher revenue and earnings in the latest quarter. In the three months ended June 30, 2010, WestJet’s revenue rose 15.2%, to $612.1 million from $531.2 million a year earlier. Excluding one-time items, earnings jumped 154.3%, to $23.4 million, or $0.16 a share, from $9.2 million, or $0.07 a share. This was the company’s 21st consecutive quarter of profitability. The gains came mostly from improved demand for the company’s flights. WestJet has a new, fuel-efficient fleet and a low cost-structure. As well, it serves more cities than many of its competitors. It’s selectively adding to these destinations, and focusing on sunshine destinations where it can add to its earnings by selling customized vacation packages that include flights. These strengths put the company in a good position to profit from the economic recovery....
SYMANTEC CORP., $12.97, Nasdaq symbol SYMC, reported earnings that matched the consensus estimate this week. However, weaker-than-expected revenue caused the stock to fall 14%. In its first quarter, which ended July 2, 2010, the software firm earned $284 million. That’s up 2.5% from $277 million a year earlier. Earnings per share rose 6.1%, to $0.35 from $0.33, on fewer shares outstanding. These figures exclude non-recurring items, such as costs to integrate acquisitions and writedowns of buildings Symantec plans to sell. Revenue was flat, at $1.43 billion. The company gets half of its revenue from international customers, so the higher U.S. dollar hurt the contribution of its overseas businesses. Without the negative impact of foreign-exchange rates, revenue would have risen 2%....
ACI WORLDWIDE INC. $19.40, symbol ACIW on Nasdaq, makes software and provides services that help its clients process transactions that involve credit cards, debit cards, automated-teller machines, smart cards, point-of-sale terminals and inter-bank payments. The company serves more than 800 clients in 88 countries, including many of the world’s largest financial institutions. ACI’s shares rose over 5% yesterday after the company reported improved results in the latest quarter....
Big companies like GE and 3M are examples of “GNP (Gross National Product) stocks”. Because they are already huge and sell to a wide variety of customers, investors feel their earnings growth may only match the growth of the overall economy. However, both GE and 3M successfully restructured their businesses during the recession. The resulting cost cuts should push their earnings higher for years to come. As well, the savings are freeing up cash for dividend increases and share buybacks. GENERAL ELECTRIC CO. $16 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.7 billion; Market cap: $171.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 3.0%; WSSF Rating: Above Average) is one of the world’s largest manufacturers....
UNITED TECHNOLOGIES CORP. $71 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 929.1 million; Market cap: $66.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.4%; WSSF Rating: Above Average) is another example of a “GNP stock” with improving growth prospects. Investors think of United Technologies as a GNP stock because of its diverse operations. It has six divisions: Pratt & Whitney aircraft engines; Otis elevators; Carrier heating and air conditioning equipment; Sikorsky helicopters; Hamilton Sundstrand aircraft controls; and UTC Fire & Security, which provides building-security and fire-protection services. Like GE and 3M, United Technologies laid off workers and closed plants during the recession. It expects these cost cuts to save it $860 million a year by 2012....
Under the new financial-reform law, the Securities and Exchange Commission will develop rules to prevent conflicts of interest in the credit rating industry. The law also creates new standards for credit analysts, including passing qualifying examinations. The new law will raise these three rating providers’ costs. However, all three have improved the quality of their ratings since the 2007/2008 financial crisis. The stricter requirements will also make it difficult for new competitors to enter the credit-rating field. Moreover, the recent market lull has depressed their share prices and p/e ratios. MCGRAW-HILL COMPANIES LTD. $30 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 315.5 million; Market cap: $9.5 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.1%; WSSF Rating: Average) gets around 70% of its earnings and 45% of its revenue from its Standard & Poor’s division, which provides financial information, including credit ratings on bonds. The company also publishes textbooks and magazines, and owns nine television stations....
GANNETT CO. INC. $14 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector: Shares outstanding: 238.2 million; Market cap: $3.3 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.1%; WSSF Rating: Average) has signed a deal with Internet-search provider Yahoo Inc. (Nasdaq symbol YHOO) that should let it sell more ads on the web sites of its newspapers and TV stations. That should help Gannett offset declining print advertising. Meanwhile, Gannett’s earnings per share rose 32.6% in the three months ended June 27, 2010, to $0.61 from $0.46 a year earlier. Savings from job cuts were the main reason for the higher earnings. Revenue fell 1.6%, to $1.37 billion from $1.39 billion. Gannett is a buy.
APPLE INC. $261 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 913.6 million; Market cap: $238.4 billion; Price-to-sales ratio: 4.2; No dividends paid; WSSF Rating: Average) will give users of its new iPhone 4 smartphone a free rubber bumper that fits over the device. This bumper seems to solve the reception problems that some users have reported. The company estimates that this solution will cost it $175 million. That’s small compared to the $3.25 billion, or $3.51 a share, Apple earned in the three months ended June 26, 2010. That’s up 78.0% from $1.8 billion, or $2.01 a share, a year earlier. Sales rose 61.3%, to $15.7 billion from $9.7 billion. Despite the reception problems, demand for the new iPhone remains strong....
VERIZON COMMUNICATIONS INC. $29 (New York symbol VZ, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.8 billion; Market cap: $81.2 billion; Price-to-sales ratio: 0.8; Dividend yield: 6.6%; WSSF Rating: Average) owns 55% of Verizon Wireless, which is the largest wireless provider in the U.S.; U.K.-based Vodafone plc owns the other 45%. This business has 92.1 million customers in 50 states, and accounts for 60% of Verizon’s revenue. The remaining 40% comes from its wireline division, which sells local and long-distance telephone service to over 27 million customers in 28 states. In the past few years, Verizon has shifted its focus toward its wireless and high-speed Internet businesses. As part of this plan, it has spun off (or handed out shares of) many of its less-profitable operations....