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
WINDSTREAM CORP. $10 will buy Iowa Telecommunications Services Inc. (New York symbol IWA), which sells telephone services in rural areas of Iowa and Minnesota. This is Windstream’s fourth major purchase this year. If you include its previous deals for two rural phone companies and a firm that sells Internet services to businesses, Windstream is paying a total of $2.2 billion in cash, shares and assumed debt. That’s about half of its market cap. Using acquisitions to expand adds risk. But Windstream can put these businesses’ steady cash flows toward the purchase price. That should help it maintain its $1.00 dividend, which yields 10.0%. Buy. T. ROWE PRICE GROUP INC. $49 is buying 26% of UTI Asset Management Co., India’s fourth-largest wealth-management firm. The $138-million price is 4% more than the $132.9 million, or $0.50 a share, that T. Rowe Price earned in the third quarter of 2009. UTI has over 10 million clients, and accounts for about 10% of India’s mutual fund market. This partnership lets T. Rowe Price profit from India’s growing prosperity without the risk of setting up its own operations. The deal should close by the end of this year. Buy. CONAGRA FOODS INC. $23 has raised its quarterly dividend by 5.3%, to $0.20 a share from $0.19. The new annual rate of $0.80 yields 3.5%. Best Buy.
AUTODESK INC. $23.81, Nasdaq symbol ADSK, fell 12% this week. That’s mainly because the software maker’s earnings forecast for the current quarter fell short of analysts’ expectations. But the company reported better-than-expected earnings in its latest quarter. Autodesk earned $63.1 million, $0.27 a share, in its third quarter, which ended October 31, 2009. That’s down 51.5% from $130.0 million, or $0.56 a share, a year earlier. These figures exclude several unusual items, including costs related to a restructuring plan that involved cutting over 10% of its workforce and consolidating certain facilities. However, Autodesk expects these cost cuts to lower its expenses by $300 million in the next fiscal year. Without restructuring costs, analysts expected the company to earn $0.23 a share. Revenue fell 31.3%, to $416.9 million from $607.1 million. The weak economy has prompted many of Autodesk’s customers, mainly engineers and architects, to delay upgrading their computer-aided design software. The company spent a high 26% of its revenue on research in the latest quarter....
DEVON ENERGY CORP., $67.50, symbol DVN on New York, has announced plans to sell its properties in the Gulf of Mexico, as well as its international assets. After taxes, the company expects the sales to generate between $4.5 billion and $7.5 billion. The properties that Devon is selling make up about 7% of the company’s proven reserves of 2.8 billion barrels of oil equivalent. But they are high-risk and costly prospects to develop, and consume over 30% of Devon’s spending. Their potential is huge, but they would take many years and billions of dollars more to develop. The sales will let Devon focus on its onshore North American properties. Apart from conventional production, these include shale oil in northern Texas and oil sands in Canada. The company also plans to cut its debt from $5.8 billion to as low as $2.5 billion. That’s just 8.3% of its $30.0-billion market cap....
WESTJET AIRLINES $11.80 (Toronto symbol WJA; SI Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 138.0 million; Market cap: $1.6 billion) serves 66 destinations in North America and the Caribbean. The company operates a fleet of 81 Boeing Next-Generation 737s....
Three years ago, when gold was at half of today’s price, we said that the best way to profit in gold was through junior miners that were increasing production by adding new mines. Our picks have done just that. Plus, they are generating lots of cash flow with rising gold prices. Here’s how they look today: European Goldfields $7.33, Toronto symbol EGU, has one mine in Greece and is nearing final approval on two more. Buy....
BIRCHCLIFF ENERGY $7.63 (Toronto symbol BIR; SI Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 123.3 million; Market cap: $940.5 million) develops, produces and explores for oil and natural gas in northwestern Alberta’s Peace River Arch area. Birchcliff owns oil production and drilling prospects at Worsely, Alberta. The company’s oil assets complement its gas assets. That lets Birchcliff pursue either oil or natural-gas opportunities at Worsely, depending on market conditions. Birchcliff’s other main project is its Montney/Doig horizontal gas drilling program at Pouce Coupe, British Columbia. This involves drilling wells sideways, or at an angle, to reach isolated pockets of oil and gas. Drillers also use this technique to follow reservoirs that are spread out in narrow layers. Horizontal drilling works well in situations where conventional drilling is either impossible or too costly....
TOROMONT INDUSTRIES LTD. $26.78 (Toronto symbol TIH; SI Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 64.7 million; Market cap: $1.7 billion) has launched a hostile, $624-million takeover bid for Enerflex Systems Income Fund (Toronto symbol EFX.UN). Enerflex unitholders would receive $13.50 per unit under the proposal. Enerflex serves oil and natural-gas producers around the world. The company leases and sells natural-gas compression and process equipment; hydrocarbon production and processing facilities; and electrical, instrumentation and control services. Enerflex would complement Toromont’s compression business, and bring Toromont a number of new oil and gas customers. As well, Toromont mainly operates in the U.S., while Enerflex focuses on markets like Australia, the Middle East and North Africa....
CALIAN TECHNOLOGIES $17.85 (Toronto symbol CTY; SI Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 7.7 million; Market cap: $138.2 million) operates in two areas: The business and technology services (BTS) division, which accounts for 64% of Calian’s revenue, provides engineers, health-care workers and other skilled professionals to clients on a contract basis. The systems-engineering division (SED) contributes the remaining 36% of revenue and sells hardware and software that is used for testing, operating and managing satellite and other communications systems. In the three months ended September 30, 2009, Calian’s earnings rose 27.0%, to a $3.4 million from $2.7 million a year earlier. Earnings per share rose 36.4%, to $0.45 from $0.33, on a 5.3% drop in shares outstanding (due to share buybacks). Revenue rose 11.2%, to a $54.4 million from $48.9 million. In the latest quarter, the BTS division benefited from its existing long-term contracts and new work from the Canadian federal government. Steady orders lifted SED’s results....
FAIRFAX FINANCIAL HOLDINGS $383.12 (Toronto symbol FFH: SI Rating: Average) (416-367-2612; www.fairfax.ca; Shares outstanding: 19.7 million; Market cap: $7.5 billion) saw its earnings per share jump 22.2%, to $31.04 from $25.40, in the three months ended September 30, 2009. The company’s insurance operations posted improved results during the quarter. Fairfax also reported higher interest and dividend income. That was partly offset by lower investment gains of $797.8 million. A year earlier, the company earned $864.6 million on its investments. Fairfax’s insurance operations have remained consistently profitable. As well, like many other insurance businesses, Fairfax holds a lot of cash for investment. The chance of further investment gains adds to Fairfax’s appeal....
HECLA MINING COMPANY $6.28 (New York symbol HL; SI Rating: Extra Risk) (208-769-4100; www.hecla-mining.com; Shares outstanding: 236.5 million; Market cap: $1.5 billion) explores for, mines and processes silver and gold in the U.S. and Mexico. In 2008, the company paid Rio Tinto plc $750 million for the 70.3% stake in the Greens Creek mine in Alaska that it didn’t already own. Greens Creek is the fifth-largest silver mine in the world. Hecla expects to produce between 10.5 million and 11 million ounces of silver this year. This will mostly come from the Greens Creek mine and Hecla’s 100%-owned Lucky Friday mine in Idaho....