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
GABRIEL RESOURCES $4.93 (Toronto symbol GBU; SI Rating: Speculative) (416-955-9200; www.gabrielresources.com; Shares outstanding: 341.0 million; Market cap: $1.7 billion; No dividends paid) and EUROPEAN GOLDFIELDS $7.13 (Toronto symbol EGU; SI Rating: Speculative) (44 (20) 7408 9534; www.egoldfields.com; Shares outstanding: 182.4 million; Market cap: $1.3 billion; No dividends paid) have both received good news about their development projects in Romania. Both projects would use cyanide in the mining process. The European Commissioner for the Environment said that the European Commission sees no environmental or health justification for a general ban of cyanide in mining activities. Gabriel is aiming to develop its 80%-owned Rosia Montana gold project in Romania. However, despite the good news, Rosia Montana still faces considerable environmental and political opposition....
REITMANS (CANADA) LTD. $19.45 (Toronto symbol RET.A; SI Rating: Extra Risk) (514-384-1140; www.reitmans.com; Shares outstanding: 68 million; Market cap: $1.3 billion; Dividend yield: 4.1%) owns 982 women’s clothing stores across Canada. The chain consists of 369 Reitmans, 165 Penningtons, 163 Smart Set, 124 Addition Elle, 76 Thyme Maternity, 66 RW & Co. and 19 Cassis stores. Reitmans continues to actively monitor its regional markets, and open and close stores as necessary. This year, it’s opening 30 new stores, closing 11 outlets and remodelling 30 stores.
Big jump in quarterly earnings
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INTEL CORP., $21.02, Nasdaq symbol INTC, reported better-than-expected second-quarter earnings and sales this week. That pushed up the stock by 4%. In the three months ended June 26, 2010, the computer-chip maker earned $2.9 billion, or $0.51 a share. That beat the consensus earnings estimate of $0.43 a share. As well, the latest earnings were up 175.2% from $1.05 billion, or $0.18 a share, a year earlier. The year-earlier results exclude a $1.45-billion charge to settle an antitrust fine in Europe. Intel spends around 15% of its sales on research, so it’s more profitable than it appears. Sales rose 34.2%, to $10.8 billion from $8.0 billion. That beat the consensus sales estimate of $10.25 billion....
ALIMENTATION COUCHE-TARD INC., $20.00, symbol ATD.B on Toronto, has more than 3,500 convenience stores in the U.S., and is the largest convenience-store operator in Canada, with over 2,000 outlets. 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 70% of its stores. Excluding one-time items, Couche-Tard’s earnings rose 45%, to $0.29 a share, in its third quarter, which ended April 25, 2010. A year earlier, it earned $0.20 a share (all figures except share price in U.S. dollars). There were a number of factors behind the gain: the company earned higher profit margins on gasoline, sold more merchandise, paid less income tax and saw its operating costs drop. Sales rose 33.7%, to $4.0 billion from $3.0 billion a year earlier. That’s mainly because Couche-Tard made a number of acquisitions in the quarter, and saw higher merchandise revenue in the U.S. and Canada....
MOTOROLA INC., $6.76, New York symbol MOT, has announced some of the details of its planned breakup into two companies. The company aims to complete the split in the first quarter of 2011. Motorola Mobility Inc. will make mobile phones and home-entertainment equipment, such as set-top boxes for receiving cable and satellite TV signals. The other company, Motorola Solutions Inc., will make communication equipment for large corporate clients, including telephone companies. Each of these businesses accounted for roughly half of Motorola’s 2009 revenue. The breakup makes sense for Motorola. That’s because its two main businesses have little overlap: The mobility business focuses on individual consumers, and the solutions business sells its products to large corporations. It also provides companies with financing for their purchases....
PULSE SEISMIC INC., $1.44, symbol PSD on Toronto, buys, sells and licenses seismic data to clients in western Canada. Most of Pulse’s customers are oil and gas companies. Pulse is buying the entire 2D and 3D seismic-data library of exploration-services company Divestco (Toronto symbol DVT). The purchase will increase the size of Pulse’s library by 127%. Divestco needed to sell the library to pay down debt. Pulse will pay Divestco $50 million in cash and 14.3 million Pulse common shares. The library contains about 80,000 kilometres of 2D data and 15,000 kilometres of 3D data, and includes highly active areas like the Cutbank Ridge, northeastern B.C.’s Montney shale-gas region, and several oil and natural-gas properties in Alberta’s Deep Basin area....
PLEASE NOTE: Our next Hotline will go out on Friday, July 9, 2010. ADOBE SYSTEMS INC., $29.85, Nasdaq symbol ADBE, reported better-than-expected earnings and revenue this week. Despite the improved results, the stock fell 14%. That’s partly because the company is spending more to market new products, such as Creative Suite 5, the latest version of its graphic-design software....
PLEASE NOTE: Our next Hotline will go out on Friday, July 9, 2010. AMAZON.COM INC., $121, symbol AMZN on Nasdaq, has dropped the price of its Kindle electronic-book reader by 27%, to $189 from $259 (all amounts in U.S. dollars). The move came after Barnes & Noble dropped the price of its Nook e-book reader to $199 and introduced a Wi-Fi only version for $149. The Wi-Fi version can only download e-books through private Wi-Fi networks, in Barnes & Noble stores and in places where AT&T offers Wi-Fi service. In contrast, the more expensive Nook comes with an unlimited 3G cellular Internet link for downloads....
Kraft’s stock fell from $29 to below $26 after it launched its takeover bid for U.K.-based chocolate maker Cadbury in September 2009. That’s partly because prominent Kraft shareholders, including billionaire Warren Buffett, felt the price for Cadbury was too high. (Buffett later cut his stake in Kraft to 6% from 8%.) Buying Cadbury also increased Kraft’s exposure to Europe. Investors worry that high levels of government debt in Greece, Spain and other European countries will hurt Kraft’s overall earnings. These debt problems will probably have little impact on chocolate demand. However, concern about European debt is pushing down the euro. That means Kraft’s European profits translate into fewer U.S. dollars. Of course, growing by acquisition exposes Kraft to hidden risks. But Cadbury, which began making chocolate in the 1850s, owns some of the industry’s best-known brands. That makes it hard for competitors to cut into its market share, no matter how good their products. Cadbury’s growing presence in developing markets should also help expand sales of Kraft’s other foods....
YUM! BRANDS INC. $41 (New York symbol YUM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 467.4 million; Market cap: $19.2 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.1%; WSSF Rating: Average) was the first western fast-food company to enter China (in 1987), and is now the largest, with 3,000 restaurants in 650 Chinese cities. China now accounts for a third of Yum’s earnings, even though Chinese outlets are a fraction of the 37,000 restaurants that Yum now operates in more than 110 countries. The company hopes to repeat this success in India, where it has 160 Pizza Hut and 70 KFC outlets. It wants to expand the total to 1,000 by 2015....