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
INTUITIVE SURGICAL $308.99 (Nasdaq symbol ISRG; SI Rating: Average) (515-507-5000; www.intuitivesurgical.com; Shares outstanding: 38.2 million; Market cap: $11.8 billion; No dividends paid) makes the “da Vinci,” a computerized surgical system. Intuitive’s shares trade at a high price, but you can buy as few as 10 through any broker. Guided by a miniature camera connected to a 3-D monitor, surgeons use the da Vinci to operate by remotely manipulating tiny robotic arms. This is safer and far less invasive than regular surgery, and helps cut a patient’s recovery time and post-operative discomfort. It also lowers scarring and infection risk.
New model should raise profits
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In next week’s Wall Street Stock Forecaster Hotline, we’ll reveal our #1 U.S. pick for 2010. ALCOA INC., $15.63, New York symbol AA, slumped 6% this week after it reported earnings that fell short of analysts’ expectations. In 2009, the aluminum maker lost $924 million, or $1.06 a share. That was much higher than the loss of $0.75 a share that analysts were expecting. In the prior year, Alcoa earned $450 million, or $0.27 a share....
WESTJET AIRLINES, $13.20, symbol WJA on Toronto, is our Stock of the Year for 2010. Next week, Wall Street Stock Forecaster, our newsletter that focuses on the U.S. stock markets, will reveal its #1 pick for 2010. Don’t miss this unique opportunity to profit. If you’re not already a Wall Street Stock Forecaster subscriber, click here to learn how you can get one month free when you subscribe today. WestJet serves 67 destinations in North America and the Caribbean. The company operates a fleet of 86 Boeing Next-Generation 737s. These planes feature more legroom, leather seats and television screens built into the back of each seat. But most important, the Next-Generation Boeing 737 is roughly 30% more fuel efficient than older planes. And WestJet will receive 49 additional 737s through 2016....
Next week, Stock Pickers Digest, our newsletter for aggressive investors, will reveal its #1 pick for 2010. Don’t miss this unique opportunity to profit. If you’re not already a Stock Pickers Digest subscriber, click here to learn how you can get one month free when you subscribe today. KRAFT FOODS INC., $28.93, New York symbol KFT, is selling its North American frozen pizza business to Switzerland-based food company Nestle S.A. This business sells frozen pizzas under the DiGiorno, Tombstone and Jack’s brands in the U.S., and the Delissio brand in Canada. It accounts for about 4% of Kraft’s sales. Nestle will pay Kraft $3.7 billion when the sale closes later this year. That’s equal to 1.3 times Kraft’s 2008 earnings of $2.8 billion, or $1.88 a share....
TRILOGY ENERGY TRUST, $8.54, symbol TET.UN on Toronto, plans to convert itself into a conventional corporation by early February 2010. Trilogy owns oil and gas properties in the Kaybob and Grande Prairie areas of central Alberta. Its production is weighted roughly 80% toward natural gas and 20% to oil. The trust now pays a monthly distribution of $0.05 a unit. After the conversion, it plans to pay a dividend of $0.035 per month. That will give it a 4.9% yield, based on today’s price. That’s still a high yield for a dividend-paying oil stock, but the company will have $1 billion in tax losses that it can use to delay paying taxes until 2016. That should let it maintain the high dividend, and give it added cash flow to reinvest in exploration and development....
CEDAR FAIR L.P., $11.16, New York symbol FUN, jumped nearly 25% this week after the company accepted an $11.50-a-unit takeover offer from Apollo Global Management, a private equity firm. If Cedar Fair unitholders approve, the sale should close by April 2010. Cedar Fair owns 11 amusement parks, six outdoor water parks, one indoor water park and five hotels, mostly in the midwestern and northeastern U.S. The slow economy has hurt Cedar Fair’s earnings. As well, it recently suspended distributions to conserve cash for debt repayments. The units are currently trading about 3% below the offer. This indicates that investors don’t expect a higher offer....
NEW GOLD, $3.77, symbol NGD on Toronto, is reopening its Cerro San Pedro mine in Mexico after a Mexican court granted an injunction against a mining-suspension order from the Mexican environmental protection agency. The mine accounts for about one-third of New Gold’s 290,000 ounces per year of gold production. Cerro San Pedro has long been the subject of disputes with local groups and environmentalists, who claim it is harming a historically important area. They also argue that the operation threatens local watersheds....
Diebold began making locks, safes and vaults for banks in 1876. NCR started making mechanical cash registers in 1879. In the years since, both companies have evolved into the world’s top suppliers of automated teller machines (ATMs). Diebold continues to focus on the banking industry, mostly with specialized services. In contrast, NCR has cut its exposure to banks with a variety of products that help retailers cut their labour costs. Despite their different strategies, we like the outlook for both companies, and see them as buys for long-term gains....
Today’s cautious investors have developed a renewed interest in dividends and dividend yields. Dividends are more dependable than capital gains, especially in a volatile market. In fact, dividends may provide up to a third of an investor’s long-term return. Recent tax cuts also mean that you pay roughly the same tax on dividend income and capital gains. At the same time, newspapers have mostly quit publishing dividend and yield data. Much Internet dividend data is unreliable....
Small caps are companies with a “market cap”(the value of shares they have outstanding) below $2 billion, or some other arbitrary figure. Small-cap stocks are generally more volatile than large-cap stocks. Temporary setbacks, such as a poor quarterly earnings report or the loss of a contract, can quickly cut their share prices. To cut your risk, you should focus on small caps that are market leaders, such as these four industrial companies. They’re also attractive in relation to earnings, and provide above-average dividend yields. GENUINE PARTS CO. $38 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.6 million; Market cap: $6.1 billion; Price-to-sales ratio: 0.6; Dividend yield: 4.2%; WSSF Rating: Average) distributes automotive replacement parts to over 4,800 independent stores in North America. It also owns and operates over 1,100 auto-parts stores under the NAPA banner....