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
FEDEX CORP., $78.70, New York symbol FDX, reported better-than-expected earnings this week. However, the stock fell 3% on a weaker-than-expected earnings outlook. In its 2010 fiscal year, which ended May 31, 2010, FedEx earned $1.2 billion, or $3.76 a share. That beat the consensus earnings estimate of $3.75 a share. The latest earnings are also a big improvement over the $98 million, or $0.31 a share, that FedEx earned in fiscal 2009. However, FedEx’s fiscal 2009 results included several unusual charges, including a $1.2-billion writedown of goodwill related to its 2004 purchase of Kinko’s Inc. (now called FedEx Office), a chain of stores that sell printing and copying services. Without these charges, FedEx would have earned $3.76 a share in fiscal 2009....
MAJOR DRILLING, $24.94, symbol MDI on Toronto, reports that its revenue rose 46.6% in the three months ended April 30, 2010, to $97.4 million from $66.4 million a year earlier. The company earned $3.2 million, or $0.14 a share. A year earlier, it lost $4.6 million, or $0.19 a share. Cash flow was $9.4 million, or $0.40 a share, in the latest quarter. Major expects to see a continued rebound during the rest of 2010. Gold prices are near all-time highs, base-metal prices are strengthening, and many mining companies have raised new funds for exploration....
DOMINO’S PIZZA $12.96 (New York symbol DPZ; SI Rating: Average)(734-930-3030; www.dominos.com; Shares outstanding: 59.1 million; Market cap: $785.7 million; No dividends paid) is the world’s largest chain of pizza stores that offer takeout and delivery. Domino’s operates 9,036 stores in the U.S. and over 60 countries. Franchisees run most outlets. Excluding one-time items, Domino’s earnings per share jumped 75% in the three months ended March 28, 2010, to $0.35 from $0.20. Sales rose 18.4%, to $381.1 million from $321.8 million. U.S. same-store sales rose 14.3%. International same-store sales gained 4.2%. The company’s labour, rent and interest costs fell during the quarter. These savings were only partly offset by higher food ingredient prices. Domino’s continues to boost its sales by aggressively marketing its “New Inspired Pizza.” The company has changed its main pizza recipe by adding seasoned crusts, as well as new tomato sauces and cheeses. As well, its express Internet ordering system, which lets customers track their orders, has proven very popular....
BREAKWATER RESOURCES $2.94 (Toronto symbol BWR; SI Rating: Speculative) (416-363-4798; www.breakwater.ca; Shares outstanding: 70.2 million; Market cap: $206.5 million; No dividends paid) has carried out a consolidation (or “cutback” or “reverse split”) of its shares on a 1-for-10 basis. That cut its shares outstanding from 702 million to 70.2 million. Companies typically cut back their shares to make it easier for institutional investors to buy without violating rules against investing in low-priced stocks (under, say, $1 or $5 a share.) Reverse stock splits can hurt investor confidence and shrink the value of a given holding – give it a “haircut,” as brokers say – by as much as 25%. For pennies with real assets, however, the haircut is often temporary....
ADOBE SYSTEMS INC. $32.44 (Nasdaq symbol ADBE; SI Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 526.4 million; Market cap: $17.1 billion) makes software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use Adobe’s software to create print publications and web pages. The company also makes Adobe Flash, which lets web site developers make web pages more interactive by adding animation and video. Computer users can download Adobe’s Flash Player viewer for free. In its first quarter, which ended March 5, 2010, Adobe earned $211.7 million, or $0.40 a share. That’s down 10.6% from $236.8 million, or $0.45 a share, a year earlier. These figures exclude several unusual items, including costs related to Adobe’s recent $1.6-billion purchase of Omniture Inc., which makes software that measures and analyzes web-site traffic....
VERIGY LTD. $9.99 (Nasdaq symbol VRGY; SI Rating: Extra Risk) (1-800-447-8378; www.verigy.com; Shares outstanding: 59.3 million; Market cap: $592.7 million; No dividends paid) earned $2 million, or $0.03 a share, excluding restructuring charges in the three months ended April 30, 2010. That’s a big improvement over a loss of $30 million, or $0.52 a share, in the year-earlier quarter. Revenue jumped 69%, to $120 million from $71 million. That’s mainly because of strong demand for the company’s test systems from makers of electronic devices used in tablet computers, smartphones and other wireless products. Verigy is a buy.
NEW GOLD $6.60 (Toronto symbol NGD; SI Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 389.6 million; Market cap: $2.6 billion) has three operating mines: the Mesquite mine in the U.S., the Cerro San Pedro mine in Mexico and the Peak mine in Australia. It also owns 30% of the El Morro copper/gold project in Chile and 100% of the New Afton gold/copper project in Kamloops, B.C. The El Morro copper/gold project contains an estimated 4.7 million ounces of gold and 3.7 billion pounds of copper. Goldcorp owns the other 70%. New Gold expects to produce a total of 330,000 to 360,000 ounces of gold this year. Production will probably rise to over 400,000 ounces in 2012, when its New Afton mine is scheduled to start up....
ALARMFORCE INDUSTRIES $7.16 (Toronto symbol AF: SI Rating: Speculative) (1-800-267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $87.6 million; No dividends paid) reports that it earned $2.2 million, or $0.18 a share, in the six months ended April 30, 2010. That’s up 29.4% from $1.7 million, or $0.14 a share, a year earlier. The home-security firm’s revenue rose 8.5%, to $18.2 million from $16.8 million. Demand for security systems is growing steadily. In all, the company had 107,900 subscribers at the end of the most recent quarter, up 12.4% from 96,000 a year earlier....
TRIMBLE NAVIGATION $30.25 (Nasdaq symbol TRMB; SI Rating: Speculative) (408-481-6914; www.trimble.com; Shares outstanding: 121.3 million; Market cap: $3.7 billion; No dividends paid) makes global positioning system (GPS) devices and technology for four main markets: 1) Engineering and construction accounts for the largest share (51%) of Trimble’s sales. 2) Agricultural GPS products (26% of sales) help farmers cut costs and increase yields. For example, GPS allows for more precise plowing, seeding and fertilizing, even at night....
RUGGEDCOM INC. $13.36 (Toronto symbol RCM; SI Rating: Speculative) (1-888-264-0006; www.ruggedcom.com; Shares outstanding: 12.1 million; Market cap: $162.2 million; No dividends paid) makes computer-networking equipment that is used in harsh environments. In the three months ended March 31, 2010, RuggedCom’s sales rose 11.3%, to $19.4 million from $17.4 million. Despite the higher sales, the company’s earnings fell 67.8%, to $1.1 million, or $0.09 a share, from $3.4 million, or $0.29 a share, a year earlier. However, one-time costs were the main reason for the drop. These expenses included costs to integrate WiNetworks (which it bought in September 2009), a stronger Canadian dollar (which lowered the value of RuggedCom’s foreign sales), and certain research and marketing expenses....