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
FAIRFAX FINANCIAL HOLDINGS $367.70 (Toronto symbol FFH: SI Rating: Average) (416-367-2612; www.fairfax.ca; Shares outstanding: 19.4 million; Market cap: $7.1 billion; Dividend yield: 2.7%) is a financial-services holding company with $29.8 billion of assets. Aside from managing investments, Fairfax sells insurance and reinsurance. Prem Watsa is the company’s chairman and founder. Fairfax trades at a high price, but you can buy an odd lot of as few as 10 shares through any broker. Reinsurers sell insurance to insurers. Fairfax does this through two subsidiaries: OdysseyRe and Group Re. Crum & Forster is Fairfax’s main U.S. insurance subsidiary, and Northbridge Financial is its principal subsidiary in Canada. The company also sells insurance in Asia. In the three months ended September 30, 2009, earnings rose 20.3%, to $562.4 million, or $31.04 a share, from $467.6 million, or $25.40. (All figures except share price and market cap in U.S. dollars.)...
KINGSWAY FINANCIAL SERVICES $1.70 (Toronto symbol KFS; SI Rating: Speculative) (905-629-7888; www.kingswayfinancial.com; Shares outstanding: 52.1 million; Market cap: $88.6 million; No dividends paid) has agreed to sell its Jevco Insurance Co. subsidiary for $263 million. This price does not include a $40-million dividend that Jevco will pay Kingsway before the sale is completed. Jevco sells insurance to high-risk drivers, as well as owners of motorcycles, snowmobiles and recreational vehicles. Kingsway will use the proceeds to pay down debt and shore up its capital. Its debt of $336.2 million is 3.8 times its market cap....
CHIPOTLE MEXICAN GRILL $104.46 (New York symbol CMG; SI Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 31.5 million; Market cap: $3.3 billion; No dividends paid) is a Denver-based Mexican-restaurant chain. Founded in 1993, Chipotle (pronounced chi-POATlay) charges slightly higher prices than fast-food chains, but offers higher-quality food, including naturally raised meat, and better decor and service. Chipotle has 956 restaurants, including its first outside of the U.S., in Toronto. In April, Chipotle plans to open a restaurant in London, England....
TOROMONT INDUSTRIES LTD. $30.20 (Toronto symbol TIH; SI Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 76.2 million; Market cap: $2.3 billion; Dividend yield: 2.0%) has completed its purchase of Enerflex Systems Income Fund. Toromont is now merging Enerflex with its Toromont Energy Systems compression business. Enerflex brings a number of new oil and gas customers to Toromont. It also expands the company’s international presence: Toromont mainly operates in the U.S., while Enerflex focuses on markets like Australia, the Middle East and North Africa....
CAMECO CORP. $29.62 (Toronto symbol CCO; SI Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 392.8 million; Market cap: $11.6 billion; Dividend yield 0.8%) is the world’s largest uranium producer. Its large, high-grade reserves, low-cost operations, significant...
SHORE GOLD $0.89 (Toronto symbol SGF; SI Rating: Start-up) (306-664-2202; www.shoregold.com; Shares outstanding: 224.5 million; Market cap: $199.8 million) released positive results from a prefeasibility study on its 100%-owned Star diamond project and the nearby 60%-held Orion South project in Saskatchewan. Newmont Mining owns the other 40% of Orion South, plus 9.9% of Shore’s common shares. The study projects that a mine would produce 35 million carats of diamonds over 20 years. Shore hopes to finish a feasibility study on the projects by early 2011. Production could begin in the first quarter of 2016. Shore Gold is a buy for highly aggressive investors.
AEROPOSTALE INC. $34.83 (New York symbol ARO; SI Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 62.7 million; Market cap: $2.2 billion; No dividends paid) is splitting its shares on a 3-for-2 basis. Shareholders will get one additional Aeropostale share for every two shares they hold. The company will have 94 million outstanding shares after the split. It now has 62.7 million outstanding shares. When a stock splits, the percentage of the company that you own is unchanged. You simply hold more shares, which are each worth proportionally less. Some studies have shown that companies that split their shares are better investments than those that do not carry out splits, but that confuses cause and effect. When a company’s stock goes up a great deal, it has an incentive to split the stock and stop it from going to higher prices where it might be less liquid....
FAIR ISAAC CORPORATION $21.80 (New York symbol FICO; SI Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 46.5 million; Market cap: $1.0 billion; Dividend yield 0.4%) reports that its revenue fell 7.3% in the three months ended December 31, 2009, to $151.5 million from $163.5 million a year earlier. That’s because tight credit markets have hurt the financial institutions that are its main customers. Despite the lower revenue, cost cuts kept earnings per share unchanged at $0.37. Fair Isaac’s long-term outlook remains positive. That’s partly because the company is using its credit-scoring expertise to diversify into other areas. For example, its new Retail Action Manager software lets retailers design sales strategies based on their customers’ buying histories. Electronics retailer Best Buy recently signed a multi-year agreement to buy Retail Action Manager....
FIRSTSERVICE CORP. $20.54 (Toronto symbol FSV; SI Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 28.3 million; Market cap: $581.3 million; No dividends paid) serves the following areas of the real-estate market: commercial real estate; residential property management; and property improvement. FirstService has more than 17,000 employees worldwide. In the three months ended September 30, 2009, FirstService’s revenue rose slightly, to $451.1 million from $450.1 million a year earlier. (All figures except share price in U.S. dollars.) Excluding one-time items, earnings per share fell 11.8%, to $0.60 from $0.68. However, cash flow rose 5.6%, to $0.95 a share from $0.90 a share. FirstService’s long-term debt of $261.5 million is a manageable 45% of its $581.3-million market cap.
Overall gains in a slow economy
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MOTOROLA INC., $7.15, New York symbol MOT, will split itself into two separate companies in the first quarter of 2011. The parent company will continue to make and sell Motorola’s cellphones and set-top boxes, which unscramble cable and satellite TV signals. Together, these two products accounted for 68% of Motorola’s 2009 sales. The new company will make and sell communication products for industrial users. These products include two-way radios, bar-code scanners and equipment for wireless networks. Both companies will continue to use the Motorola name....