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
BECKMAN COULTER INC. $64 (New York symbol BEC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 69.9 million; Market cap: $4.5 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.1%; WSSF Rating: Average) makes lab equipment that doctors and medical researchers use to detect substances in bodily fluids. Under Obamacare, Beckman and other medical-device makers will have to pay new fees, which they will attempt to pass on to their customers. Of course, expanded health care should lead to greater demand for Beckman’s tests. Right now, however, the market is focusing on more immediate matters. The stock fell 7% in mid-March due to problems with a test kit that determines whether a patient has suffered a heart attack....
Non-bank financial companies, such as mutual-fund and insurance firms, are good ways to diversify your Finance-sector holdings. The six we analyze below are leaders in their niche markets. That cuts their risk. As well, their well-known brands will help them grow as the global economy continues to recover. We have a high opinion of all six companies, but only two are buys right now. AMERICAN EXPRESS CO. $41 (New York symbol AXP; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $49.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.8%; WSSF Rating: Average) gets most of its revenue from the the fees it charges merchants when consumers use its credit and charge cards. It also provides travel-agency services. American Express set aside $5.3 billion to cover bad loans in 2009. That’s down 8.4% from $5.8 billion in 2008. However, the 2009 figure is still up more than 100% from four years ago....
PEPSICO INC. $66 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $105.6 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.7%; WSSF Rating: Above Average) is developing a new type of salt that contains less sodium than regular salt. That will help it achieve its goal of cutting the sodium in its potato chips by 25% over the next five years. PepsiCo also aims to use less sugar in its soft drinks. Healthier products should help PepsiCo offset slowing sales in North America, particularly as baby boomers consume fewer soft drinks and snack foods as they grow older. PepsiCo is a buy.
ARKANSAS BEST CORP. $29 (Nasdaq symbol ABFS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 25.3 million; Market cap: $733.7 million; Price-to-sales ratio: 0.5; Dividend yield: 0.4%; WSSF Rating: Average) lost $127.9 million, or $5.12 a share, in 2009. That figure included a $64-million writedown of goodwill and a one-time, $4.6-million pension contribution. Without these costs, the company would have lost $61.6 million, or $2.46 a share. Arkansas Best earned $29.2 million, or $1.14 a share, in 2008. Revenue fell 19.6%, to $1.5 billion from $1.8 billion, as the slow economy continues to hurt demand for the company’s trucking services. In response to the shrinking revenue and earnings, Arkansas Best has cut 700 jobs, or 7% of its workforce. That should lower its annual costs by $15 million to $18 million, starting this year. To further conserve cash, Arkansas Best has cut its dividend by 80.0%. The new annual rate of $0.12 yields 0.4%....
DEL MONTE FOODS CO. $15 (New York symbol DLM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 198.6 million; Market cap: $3.0 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.1%; WSSF Rating: Average) makes canned fruit, vegetables, sauces and soups. It also makes pet food. In its third quarter, which ended January 31, 2010, earnings fell 4.0%, to $57.2 million from $59.6 million a year earlier. Earnings per share fell 6.7%, to $0.28 from $0.30, on fewer shares outstanding. If you exclude a charge related to the early repayment of debt, it would have earned $0.34 a share in the latest quarter. Del Monte continues to benefit from its drive to improve productivity. This should cut its costs by $80 million in fiscal 2010. Del Monte is using the savings to increase its marketing activities. That’s helping it compete with private-label foods: Its sales rose 7.5% in the latest quarter, to $1.0 billion from $942.3 million....
DIAGEO PLC ADRs $66 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 626.2 million; Market cap: $41.3 billion; Price-to-sales ratio: 2.9; Dividend yield: 3.6%; WSSF Rating: Above Average) is the world’s largest premium alcoholic beverage company. Spirits account for 73% of Diageo’s sales, followed by beer (22%) and wine (5%). Each American Depositary Receipt represents four Diageo common shares. Diageo owns some of the top brands in the alcoholic-beverage business, including Guinness stout, Smirnoff vodka, Johnnie Walker scotch whiskies, Captain Morgan rum, Baileys Original Irish Cream liqueur, J&B scotch whisky and Tanqueray gin. In the six months ended December 31, 2009 (Diageo’s fiscal year ends June 30), the company’s revenue rose 2.7%, to 5.2 billion pounds from 5.1 billion pounds a year earlier (1 British pound = $1.54 Canadian)....
Global stock market investing still remains riskier in many ways than investing in North America. That’s because many foreign countries, particularly China and other emerging markets, have language barriers and weaker investor-protection laws. They may also have less commitment to openness, fairness and so on. You can lower your risk by sticking with American Depositary Receipts (ADRs). An ADR is an investment unit for foreign companies that trade on U.S. stock markets. These units can represent fractions of shares, whole shares or multiple shares in the foreign company. They help investors simplify their international investing by letting them buy foreign shares on U.S. exchanges without the complications of foreign transactions....
THE BOEING CO. $72 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 757.0 million; Market cap: $54.5 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.3%; WSSF Rating: Above Average) will increase production of its 777 passenger jet to seven planes a month from five in mid-2011. In mid-2012, it will boost production of its 747 airliner to two planes a month from 1.5. The increases should let Boeing meet rising demand as the improving economy spurs airlines to replace aging planes. The company is also continuing to test its new 787 Dreamliner. Boeing is still on schedule to start delivering the new plane by the end of 2010. By 2013, it hopes to produce 10 Dreamliners a month, up from two a month now....
STANLEY BLACK & DECKER INC. $59 (New York symbol SWK; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.4 million; Market cap: $9.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.2%; WSSF Rating: Average) is the new name of The Stanley Works after the company recently completed its all-stock purchase of rival toolmaker Black & Decker Corp. Stanley shareholders own 50.5% of the combined company. Black & Decker investors own the remaining 49.5%. Stanley feels that it can find $350 million in annual savings by the end of the third year following the merger. (In 2009, Stanley earned $215.5 million, or $2.68 a share.) Most of these savings will come from combining plants, distribution networks and purchasing systems. However, big mergers like this often come with hidden risks. Stanley Black & Decker is a hold.
NEWMONT MINING CORP. $50 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 491.0 million; Market cap: $24.6 billion; Price-to-sales ratio: 3.3; Dividend yield: 0.8%; WSSF Rating: Average) is one of the world’s largest gold-mining companies. It has major mines in the U.S., Australia and Peru. Gold accounts for about 85% of Newmont’s revenue. The remaining 15% comes from copper, zinc and other metals. Most of Newmont’s copper comes from its 35.4% stake in the large Batu Hijau mining complex in Indonesia. Average gold prices rose 248.4%, from $279 an ounce in 2000 to $972 in 2009. Gold has fallen from the all-time high of $1,214.80 an ounce that it reached in late 2009, and now trades around $1,093....