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.
Read More
Close
Growth Stocks Library Archives
RUSSEL METALS, $19.75, symbol RUS on Toronto, earned $0.28 a share before one-time items in the three months ended March 31, 2010. That’s a big improvement over the $0.10 a share it earned a year earlier. However, revenue fell 18.1%, to $525.9 million from $642.3 million. Lower steel prices were the main reason for the revenue decline. However, Russel had already taken measures to control its costs and conserve cash: In early 2009, it cut 500 jobs (or 16.7% of its workforce), lowered executive pay by 10% and reduced its remaining employees’ hours. Those measures are letting it post higher earnings. As well, the company cut its quarterly dividend last year by 44.4%, to $0.25 a share from $0.45. The stock now yields 5.1% a year, and the dividend now appears safe. Russel holds cash of $311.1 million, or $5.21 a share. Its $335.5 million of long-term debt is a reasonable 28% of its market cap....
MCKESSON CORP., $63.73, New York symbol MCK, is a leading North American wholesale drug distributor. It also sells software and services that help pharmacies and clinics manage their inventories. The company earned $1.3 billion in its latest fiscal year, which ended March 31, 2010. That’s up 53.5% from $823 million in the prior year. Earnings per share rose 57.2%, to $4.70 from $2.99, on fewer shares outstanding. If you exclude unusual items, mainly costs to settle a class-action lawsuit that accused the company of inflating the prices of prescription drugs, per-share earnings would have increased 12.5%, to $4.58 from $4.07. On that basis, the latest earnings beat the consensus forecast of $4.57 a share. The company’s sales rose just 1.9% in its latest fiscal year, to $108.7 billion from $106.6 billion. In response to the slower sales, the company cut its costs, including layoffs. That was the main reason for the higher earnings....
DOREL INDUSTRIES, $37.20, symbol DII.B on Toronto, reports that its earnings jumped 34.5% in the three months ended March 31, 2010, to $1.13 a share from $0.84 a year earlier. (All figures except share price in U.S. dollars.) Revenue rose 13.5% to $596.3 million from $525.2 million. Revenue was up across all three of the company’s divisions: The recreational/leisure segment reported 12.5% higher revenue; the juvenile division’s revenue rose 12.5%; and home furnishings gained 17.3%. Dorel makes a wide range of products, including bicycles, ready-to assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs (including Eddie Bauer and Disney Baby licensed products); home furnishings, including chairs, tables, bunk beds, futons and step stools; and recreational products....
HEWLETT-PACKARD CO., $51.97, New York symbol HPQ, is buying smartphone-maker Palm Inc. (Nasdaq symbol PALM) for $1.2 billion. About $1 billion of the purchase price will be in cash; the remaining $200 million consists of Palm’s debt. Hewlett holds cash of $13.6 billion, or $5.79 a share, so it can easily afford this purchase. The deal should close by July 31, 2010. Palm sells mobile-computing and communication devices to consumers and businesses worldwide. The company has one main product line: smartphones, which it sells under the Treo, Centro, Pre and Pixi brands. The Pre and Pixi smartphones use the webOS operating system. Palm will strengthen Hewlett’s own line of wireless devices. It should also help Hewlett compete as more people access the Internet through mobile devices instead of desktop and laptop computers. As well, Palm’s software expertise will help Hewlett develop new products. For example, Hewlett is working on a touch-screen tablet computer that would compete with Apple’s iPad....
WYNDHAM WORLDWIDE, $26.81, symbol WYN on New York, reported higher-than-expected first-quarter profits this week. In the three months ended March 31, 2010, Wyndham’s earnings per share, excluding one-time items, fell 17.1%, to $0.34 from $0.41. Despite the drop, the latest earnings beat the consensus estimate of $0.30 a share. Revenue fell 1.7%, to $886 million from $901 million. Here too, revenue was higher than forecast, even though it declined: the consensus revenue estimate was $848 million. The lower revenue and earnings were mostly the result of an accounting change. The economic recovery is pushing up travel demand and increasing the number of guests at Wyndham’s hotels....
Demand for wireless services continues to rise strongly. New phones and devices, such as Apple’s iPad and Amazon’s Kindle e-book reader, should continue to spur demand for wireless service. We still have a high opinion of Apple and Amazon. But their high share prices make them vulnerable to sudden setbacks. We think network operators like AT&T and Verizon provide a conservative way to profit from the popularity of wireless devices. That’s because they have wider and steadier revenue sources than device makers. AT&T INC. $26 (New York symbol T; Income Portfolio, Utilities sector; Shares outstanding: 5.9 billion; Market cap: $153.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 6.5%; WSSF Rating: Average) gets 50% of its revenue by selling traditional telephone services to 45 million customers in 22 states. The company’s wireless division has 87 million customers nationwide, and accounts for 45% of AT&T’s revenue. The remaining 5% comes from selling ads in telephone directories....
The Securities and Exchange Commission (SEC) has accused broker Goldman Sachs of misleading investors about the risks of investing in certain mortgage-backed securities. Fears that the SEC will launch similar lawsuits have hurt the stock prices of most major U.S. banks. As well, Congress may pass new laws aimed at preventing another financial crisis. These reforms could force banks to raise more capital to cover bad loans, or sell some of their businesses. Despite the uncertainty, we still like the long-term prospects of these two high-quality banks:...
Computer-chip technology changes rapidly. New advances keep driving down chip prices and profit margins. To lower your risk, we look for companies that have the financial strength to keep developing new products. Here are four high-quality chip-related stocks that we see as buys. All four are in a strong position to gain from rising consumer and business spending on new computers and other devices. INTEL CORP. $23 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.5 billion; Market cap: $126.5 billion; Price-to-sales ratio: 3.1; Dividend yield: 2.7%; WSSF Rating: Above Average) is the world’s largest computer chip maker. It controls about 80% of the market....
MICROSOFT CORP. $31 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 8.8 billion; Market cap: $272.8 billion; Price-to-sales ratio: 4.7; Dividend yield: 1.7%; WSSF Rating: Above Average) has risen 16% since it released its Windows 7 operating system on October 22, 2009. About 10% of the world’s computers now use Windows 7. Strong demand for this new program is the main reason why Microsoft’s earnings jumped 34.6% in its third quarter, to $4.0 billion from $3.0 billion a year earlier. (Microsoft’s third quarter ended March 31, 2010.) Earnings per share rose 36.4%, to $0.45 from $0.33, on fewer shares outstanding. Revenue rose 6.3%, to a record $14.5 billion from $13.7 billion. Microsoft spent 15.2% of its revenue on research in the latest quarter. Microsoft is a buy.
CANON INC. ADRs $46 (New York symbol CAJ; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.2 billion; Market cap: $55.2 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.5%; WSSF Rating: Above Average) earned $610.9 million, or $0.49 per ADR, in the three months ended March 31, 2010 (each American Depositary Receipt represents one common share). That’s up 237.4% from $181.1 million, or $0.15 per ADR, a year earlier. Sales rose 15.9%, to $8.1 billion from $7.0 billion. Strong digital-camera sales were the main reason for the gain. As well, the weaker Japanese yen makes Canon’s products more affordable in North America and other major markets. Demand for Canon’s copiers and printers should also rise as the global economy recovers. Canon is a buy.