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
AMAZON.COM $128.36 (Nasdaq symbol AMZN; SI Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 433.0 million; Market cap: $55.6 billion; No dividends paid) is now selling its Kindle e-book reader in Canada. The reader costs $279 U.S., plus shipping. Canadian Kindle users can wirelessly download files from Amazon’s Kindle store, which contains over 300,000 books. Most bestsellers and new releases will be $11.99 U.S. or less. Users can download Canadian newspapers, including the Globe and Mail and the National Post, as well as leading U.S. and international magazines and newspapers. For now, Canadians won’t be able to use all of the Kindle’s wireless-connection features, including subscriptions to blogs and the Kindle web browser. This is likely because Amazon has not reached a deal with a Canadian wireless carrier, such as BCE, Rogers or Telus....
TOROMONT INDUSTRIES LTD. $27.03 (Toronto symbol TIH; SI Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 64.7 million; Market cap: $1.7 billion; Dividend yield: 2.2%) has two divisions: the equipment group and the compression group. The equipment group’s Caterpillar dealership is one of the world’s largest, covering Ontario, Manitoba, Newfoundland and Labrador, and Nunavut. Toromont’s U.S.-based compression group designs, engineers, builds and installs compression systems for natural gas, fuel gas and carbon dioxide, as well as industrial and recreational refrigeration systems (for such things as hockey, curling and skating surfaces.)...
H&R BLOCK INC., $20.62, New York symbol HRB, lost $126.5 million, or $0.38 a share, in its second quarter, which ended October 31, 2009. That’s 5.0% less than the $133.2 million, or $0.40 a share, that it lost a year earlier. The current figure also beat the $0.40-a-share loss that analysts were expecting. Revenue fell 7.2%, to $326.1 million from $351.5 million. H&R Block gets about 75% of its revenue from its tax-preparation business. As a result, it earns most of its money during its fourth quarter, which includes the April 15 income-tax-filing deadline. The company typically loses money in its first and second quarters....
REITMANS, $17.18, symbol RET.A on Toronto, reports that its earnings fell 17.7% in its third quarter, which ended August 1, 2009. The retailer earned $18.9 million, or $0.28 a share, compared to $23.0 million, or $0.33 a share, a year earlier. Sales fell slightly, to $270.7 million from $271.2 million. Same-store sales were down 2.2%. Reitmans owns 981 women’s clothing stores across Canada. These include 370 Reitmans, 167 Smart Set, 163 Penningtons, 123 Addition Elle, 76 Thyme Maternity, 65 RW & Co. and 17 Cassis stores....
GENERAL ELECTRIC CO., $16.20, New York symbol GE, will pay Vivendi SA of France $5.8 billion for the 20% of NBC Universal that it doesn’t already own. The company will then merge NBC Universal with cable stations and regional sports networks owned by cable operator Comcast Corp. (Nasdaq symbol CMCSA). GE will retain 49% of the joint venture, and receive about $8 billion. To put these figures in context, GE earned $2.5 billion, or $0.22 a share, in the three months ended September 30, 2009. The deal should close by September 2010. Selling control of NBC Universal will let GE focus on its main industrial businesses. These include manufacturing aircraft engines and power-station equipment. The move also lowers GE’s exposure to falling television advertising revenue. However, the company’s financial division, which accounts for a third of its revenue, continues to struggle....
AEROPOSTALE INC., $28.95, symbol ARO on New York, fell 10% this week, even though it reported higher sales and profits in the latest quarter. In the three months ended October 31, 2009, Aeropostale’s revenue rose 17.8%, to $567.8 million from $482.0 million a year earlier. Earnings jumped 46.9%, to a record $62.6 million, or $0.94 a share, from $42.6 million, or $0.64 a share. The company’s wide variety of clothing, low prices and aggressive promotions were the main reasons for its strong results. In the month of November, sales rose 13.5%, to $228 million from $200.9 million a year ago. But even though same-store sales jumped 7%, they missed consensus expectations of 7.7%. The company expects to earn $1.20 to $1.24 a share in the current quarter. But the low end of that estimate is below the $1.22 a share that analysts are expecting....
INTUITIVE SURGICAL, $280.11, symbol ISRG on Nasdaq, has received approval to sell its “da Vinci” surgical system in Japan. That country is the world’s second-largest market for medical technology after the U.S. The da Vinci is a computerized surgical system. 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 surgical techniques, and helps cut a patient’s recovery time and post-operative discomfort. It also reduces scarring and infection risk. The da Vinci system is used in heart surgeries, prostatectomies and hysterectomies, among other procedures. Now that Intuitive has the approval of the Japanese Ministry of Health, Labour and Welfare, the company will focus on meeting necessary trade and import requirements. It will also begin setting up a marketing and payment structure....
H.J. HEINZ CO., $42.42, New York symbol HNZ, rose 3% this week after it reported better-than-expected quarterly earnings and sales. The food maker also boosted its full-year outlook. Heinz earned $0.76 a share in its second quarter, which ended October 28, 2009. That’s down 11.6% from $0.86 a year earlier. However, if you exclude an $0.18-a-share foreign-currency hedging gain in the year-earlier quarter, its earnings per share would have risen by 11.8%. The latest earnings also beat the consensus estimate of $0.70 a share. Sales rose 2.5%, to $2.7 billion from $2.6 billion. Analysts were expecting $2.63 billion. Heinz is benefiting as the slow economy prompts more people to eat at home. The company is also making strong gains in emerging markets, including Mexico, India and Russia. That helped offset lower sales to restaurants in the U.S....
Agilent was a unit of Hewlett-Packard until 1999, when Hewlett set it up as a separate company and handed it out to its investors as a special dividend or spinoff. The company has since gone through a lot of changes. In 2005, it sold its struggling chip-making operations. In 2006, it spun off Verigy Ltd., its computer-chip-testing business. Meanwhile, it has gone through two major restructurings in the past four years. All this has helped Agilent cut its costs. This will spur its long-term earnings and cut its risk. It is also acquiring a medical-testing products firm to expand in that business, and this helps cut its dependence on the highly cyclical electronics industry. AGILENT TECHNOLOGIES INC. $30 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 346.0 million; Market cap: $10.4 billion; Price-to-sales ratio: 2.3; WSSF Rating: Average) makes testing systems that help improve the quality of electronic products, such as cellphones, set-top boxes and high-speed Internet equipment....
HEWLETT-PACKARD CO. $50 (New York symbol HPQ; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 2.4 billion; Market cap: $120.0 billion; Price-to-sales ratio: 1.0; WSSF Rating: Above Average) spun off Agilent in November 1999 as part of a plan to focus on its main computer and printer businesses. The company is expanding its computer-services operations, which help businesses manage their hardware and software needs. These services generate higher profits for Hewlett than selling hardware. As well, long-term servicing contracts give it more predictable revenue streams. Hewlett now gets 46% of its revenue from business services. In August 2008, the company paid $13.9 billion for Electronic Data Systems Corp., a leading supplier of computer services to large government agencies and corporations. Hewlett is also paying $2.7 billion for computer-networking equipment maker 3Com Corp. (Nasdaq symbol COMS). The company expects to close the deal in the first half of next year....