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
Food sellers Sysco and Supervalu stand to gain from increasing restaurant traffic and grocery store sales as the economy recovers. However, they could have trouble passing along higher food and other costs to their customers. We feel both stocks will likely make little progress in the next few months. SYSCO CORP. $31 (New York symbol SYY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 592.6 million; Market cap: $18.4 billion; Price-to-sales ratio: 0.5; Dividend yield: 3.2%; WSSF Rating: Average) supplies food and kitchen supplies to over 400,000 restaurants, hotels and schools in North America and Ireland. Restaurants account for over 60% of Sysco’s sales, and more people are eating at home because of the weak economy. As a result, the company’s second-quarter sales fell 3.1%, to $8.9 billion from $9.1 billion a year earlier (Sysco’s second quarter ended December 26, 2009). Lower food costs also held back Sysco’s sales....
TUPPERWARE BRANDS CORP. $52 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 63.1 million; Market cap: $3.3 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.9%; WSSF Rating: Above Average) continues to see strong demand for its plastic food containers and beauty products in Brazil, China, India and other emerging markets. These markets now account for more than half of Tupperware’s sales. In the three months ended March 27, 2010, earnings per share jumped 68.9%, to $0.76 from $0.45 a year earlier. Sales rose 20.4%, to $557.1 million from $462.8 million. Tupperware Brands is a buy.
SNAP-ON INC. $48 (New York symbol SNA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 57.8 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.5%; WSSF Rating: Average) earned $36.8 million in the three months ended April 3, 2010. That’s up 5.7% from $34.8 million a year earlier. Earnings per share rose 5.0%, to $0.63 from $0.60, on more shares outstanding. Revenue rose 8.6%, to $621.6 million from $572.6 million. The slow economy has prompted more consumers to hold on to their older cars instead of buying new ones. As a result, auto mechanics are ordering more tools and diagnostic equipment from Snap-On. The company is also benefiting from a recent cost-cutting plan. However, Snap-On’s European sales remain weak, and its financing division continues to lose money....
WEYERHAEUSER CO. $49 (New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 211.4 million; Market cap: $10.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 0.4%; WSSF Rating: Extra Risk) is a major North American lumber and paper producer. The company’s shareholders recently approved its plan to convert to a real estate investment trust (REIT). REITs pay little or no income tax. As well, they must pay 90% of their earnings to their shareholders as dividends. Many of Weyerhaeuser’s rivals operate as REITs, so this conversion will give it a tax advantage they now enjoy. Weyerhaeuser will probably convert to a REIT by the end of this year. The company must make a one-time distribution of its retained earnings to its shareholders when it converts. It expects this special dividend to total $6 billion. The IRS requires at least 20% of this payout to be in cash. At the end of 2009, Weyerhaeuser held cash of $1.9 billion, or $9.04 a share, so it should have little trouble meeting this requirement. Weyerhaeuser is a hold.
APACHE CORP. $107 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 336.6 million; Market cap: $36.0 billion; Price-to-sales ratio: 4.1; Dividend yield: 0.6%; WSSF Rating: Average) produces oil and natural gas from properties in the U.S., Canada, the U.K., Australia, Egypt and Argentina. Roughly 50% of its production is oil, and 50% is natural gas. The company is expanding its offshore oil-drilling operations in the Gulf of Mexico, which account for roughly 20% of its production. Offshore drilling is riskier than onshore operations, but Apache has a long history of success in this region.
Big purchases look promising
...
J.C. PENNEY CO. INC. $31 aims to increase its annual sales by 25% over the next four years, mainly through exclusive merchandise deals. For example, it recently signed a 10-year deal with LIZ CLAIBORNE INC. $8.64 that made J.C. Penney the only U.S. department store that carries Liz Claiborne’s clothing and accessories....
INTERNATIONAL BUSINESS MACHINES CORP., $129.99, New York symbol IBM, fell slightly this week, even though it reported higher-than-expected earnings and revenue. In the three months ended March 31, 2010, IBM’s earnings rose 13.3%, to $2.6 billion from $2.3 billion a year earlier. Earnings per share rose 15.9%, to $1.97 from $1.70, on fewer shares outstanding. Revenue rose 5.3%, to $22.9 billion from $21.7 billion. These figures beat the consensus estimates of $1.93 a share in earnings on revenue of $22.8 billion. The gains were mainly driven by higher revenue at IBM’s mainframe computer and software divisions. As well, the company gets two-thirds of its revenue from foreign markets, and the lower U.S. dollar enhanced the results of its overseas operations....
CHIPOTLE MEXICAN GRILL, $142.98, symbol CMG on New York, jumped over 13% this week. That’s mainly because the company reported that its earnings per share climbed 51.9%, to $1.20 from $0.79, in the three months ended March 31, 2010. That was far ahead of the consensus earnings-per-share estimate of $0.95. Sales rose 15.6%, to $409.7 million from $354.5 million. Chipotle is a Denver-based Mexican-restaurant chain that uses premium ingredients, such as naturally raised meat, in the meals it sells. The company has 976 restaurants, including its first outside of the U.S., in Toronto. In May, Chipotle plans to open a restaurant in London, England....
FORTRESS PAPER $23.45 (Toronto symbol FTP; SI Rating: Extra Risk) (1-888-820-3888; www.fortresspaper.com; Shares outstanding: 10.2 million; Market cap: $240.0 million; No dividends paid) is a Canadian specialty paper producer. Fortress has plants in Germany and Switzerland. The company gets 62% of its sales by making high-quality wallpaper-base products, as well as high-grade graphic papers and other specialty papers. The remaining 38% of its sales comes from security paper used in banknotes, passports and visas. In the three months ended December 31, 2009, sales rose 10.2%, to $51 million from $46.3 million a year earlier. Earnings per share, excluding one-time items, rose 67.9%, to $0.47 from $0.28. The higher sales were part of the reason for the gain. Fortress also cut its costs. It holds cash of $33.2 million, or $3.25 a share, and has low debt....
INTUITIVE SURGICAL $365.98 (Nasdaq symbol ISRG; SI Rating: Average) (515-507-5000; www.intuitivesurgical.com; Shares outstanding: 39.2 million; Market cap: $14.3 billion; No dividends paid) has more than doubled for us since we first recommended the stock at $150 last June. The company makes the “da Vinci,” a computerized surgical system for use in heart surgery and other procedures. The da Vinci is safer and far less invasive than regular surgery. It also cuts patient recovery time and post-operative discomfort. In the latest quarter, Intuitive’s revenue climbed 74.4%, to $328.6 million from $188.4 million a year earlier. Earnings per share jumped 205.6%, to $2.20 from $0.72. Intuitive should earn $7.75 a share this year, up 27.7% from $6.07 last year....