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.
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Growth Stocks Library Archives
FRONTIER COMMUNICATIONS CORP. $7.70 (New York symbol FTR; Income Portfolio, Utilities sector; Shares outstanding: 991.8 million; Market cap: $7.6 billion; Price-to-sales ratio: 1.1; Dividend yield: 9.7%; WSSF Rating: Average) sells Internet and traditional telephone services to 6.2 million customers in 27 states. Its clients are mainly in rural and suburban areas. The deal with Verizon tripled Frontier’s size. As well, many of these new clients are in areas with little high-speed Internet access. That gives Frontier a strong growth opportunity. As well, it can combine some of its current functions with those of the new Verizon business. That should free up cash that Frontier can use to expand its Internet operations. The $0.75 dividend, down from $1.00 before the purchase, seems safe and yields 9.7%. We’re adding Frontier to our Income Portfolio. For now, the stock is a hold.
Toyota and Honda made deep cost cuts during the recession. That should help them increase their long-term profitability. However, we prefer Honda for new buying. That’s because Toyota is relying on customer incentives to spur car sales in the wake of several safety recalls. These extra expenses will offset the benefits of its other cost cuts for the next year or so. TOYOTA MOTOR CO. ADRs $70 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.6 billion; Market cap: $112.0 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.6%; WSSF Rating: Above Average) is Japan’s largest carmaker. The stock has moved down from its recent high of $92 in January 2010. That’s because of bad publicity over recalls to fix sticky gas pedals and other problems. However, these defects only affected a small number of vehicles, and Toyota’s quick response helped limit any permanent damage to its brand....
FORD MOTOR CO. $13 (New York symbol F; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 3.4 billion; Market cap: $44.2 billion; Price-to-sales ratio: 0.4; No dividends paid since June 2006; WSSF Rating: Speculative) earned $2.6 billion in the three months ended June 30, 2010. That’s up 14.9% from $2.3 billion a year earlier. However, earnings per share fell 11.6%, to $0.61 from $0.69, on more shares outstanding. Revenue rose 16.8%, to $31.3 billion from $26.8 billion. The company sold 1.4 million cars and trucks during the quarter, up 18.8% from 1.2 million a year earlier. However, high U.S. unemployment could slow Ford’s sales in the second half of 2010. Ford is a hold.
C.R. BARD INC. $78 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 95.1 million; Market cap: $7.4 billion; Price-to-sales ratio: 2.9; Dividend yield: 0.9%; WSSF Rating: Above Average) is seeing rising demand for its medical devices, particularly in emerging markets. The higher demand helped push up Bard’s earnings by 7.9% in the three months ended June 30, 2010, to $134.0 million from $124.2 million a year earlier. Earnings per share rose 13.0%, to $1.39 from $1.23, on fewer shares outstanding. These figures exclude unusual items, including a writedown of funds that Bard is owed by Greek public hospitals. Sales rose 7.9%, to $673.9 million from $624.6 million. The company has completed its $200-million purchase of California-based SenoRx Inc., which makes devices that help diagnose and treat breast cancer. The cost of integrating SenoRx will probably lower Bard’s 2010 earnings by $0.03 to $0.06 a share. However, SenoRx will add around $56 million to Bard’s annual revenue, and the purchase looks like a good fit with Bard’s current cancer-treatment products....
LIZ CLAIBORNE INC. $4.76 (New York symbol LIZ; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 94.5 million; Market cap: $449.8 million; Price-to-sales ratio: 0.2; No dividends paid since December 2008; WSSF Rating: Extra Risk) will close its 87 “Liz Claiborne” outlet stores over the next few months. These stores sell heavily discounted clothing and accessories. The company has sold many of its less-profitable brands over the past few years. As well, it has signed exclusive deals that let it sell its clothing through other retailers. These moves have left the Liz Claiborne outlet stores with less merchandise to sell. The company will likely record a $7-million non-cash charge for writedowns of goodwill and other intangible assets. It lost $35.9 million, or $0.38 a share, in the first quarter of 2010. The company also expects cash charges to terminate leases and pay severance to employees. It will finalize these charges in the next few weeks....
GENERAL MILLS INC. $35 (New York symbol GIS; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 651.2 million; Market cap: $22.8 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.2%; WSSF Rating: Above Average) is the second-largest maker of breakfast cereals in the U.S., after Kellogg. Its major brands include Cheerios, Wheaties and Total. The company also makes Progresso soups, Betty Crocker baking mixes, Green Giant canned vegetables and Yoplait yogurt. Over the past few years, General Mills has been working on increasing its international sales. It now gets roughly 20% of its sales from overseas. The company is also successfully developing healthier products, such as low-salt soups. It typically spends around 2% of its sales on developing new products.
Strong history of rising sales, earnings
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NORDSTROM INC. $34 has raised its quarterly dividend by 25.0%, to $0.20 a share from $0.16. The new annual rate of $0.80 yields 2.4%. Buy. ARKANSAS BEST CORP. $23 lost $0.30 a share in the three months ended June 30, 2010. That’s a big improvement over the $0.62 a share it lost in the year-earlier quarter. Revenue rose 13.4%, to $411.3 million from $362.6 million. The company shipped more goods during the quarter; that offset slightly lower shipping rates. However, Arkansas Best needs a sustained economic recovery to return to profitability. It also needs to cut its labour costs, which are about 10% higher than the industry average. Hold. FEDEX CORP. $83 expects to earn $4.60 to $5.20 a share in its current fiscal year, which ends May 31, 2011. That’s up from its previous prediction of $4.40 to $5.00 a share. The courier company is shipping more packages than it expected, particularly through its more-profitable overnight services. Buy.
BECKMAN COULTER INC., $47.26, New York symbol BEC, makes lab equipment that doctors and medical researchers use to detect substances in blood and other bodily fluids. The stock fell 21% on Friday after the company warned that problems with a test kit are hurting its sales and earnings. This test kit determines whether a patient has suffered a heart attack. Earlier this year, Beckman recalled the test kit, which accounted for 1% of its 2009 sales. The company is now working with the U.S. Food and Drug Administration to fix the problem. Beckman plans to begin clinical trials of the upgraded test kit next year....
AMAZON.COM INC., $118.81, symbol AMZN on Nasdaq, reported sharply higher results in the latest quarter. In the three months ended June 30, 2010, Amazon’s sales jumped 41.2%, to $6.6 billion from $4.7 billion a year earlier. Earnings jumped 45.8%, to $207 million, or $0.46 a share, from $142 million, or $0.33 a share. Despite the big gain, the latest earnings fell short of the consensus estimate of $0.54 a share. Amazon’s North American media sales rose 15.3% during the quarter. Overall media sales climbed 17.7%, to $2.9 billion. However, sales of electronics and other general merchandise jumped 68.6% to $3.5 billion. Sales in the company’s “other” category, which includes Amazon’s web-services business, rose 45%, to $203 million....
CAMECO CORP. $25 (Toronto symbol CCO; SI Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 393.0 million; Market cap: $9.8 billion; Dividend yield 1.1%) has moved up from under $22 in early July on an improving long-term outlook for uranium. The metal’s strong prospects were highlighted by Cameco’s first major supply agreement with a Chinese nuclear utility. China plans to build at least 60 reactors by 2020. Under the deal, Cameco will deliver 23 million pounds of uranium to China National Nuclear Corp. (CNNC) by 2020. At current levels, that equals roughly one year of Cameco’s production. Cameco is the world’s largest uranium producer. It supplies over 18% of global production, and has large, high-grade reserves, low-cost operations, significant market share and a number of uranium mines. The company also holds a 31.6% interest in Ontario’s Bruce Power partnership, which operates four of the eight reactors at the Bruce plant, North America’s largest nuclear-power complex....