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
NEW GOLD, $4.54, symbol NGD on Toronto, stands to gain as a result of Barrick Gold’s (Toronto symbol ABX) agreement this week to pay $465 million for Xstrata plc’s 70% stake in the El Morro copper/gold project in Chile. El Moro contains an estimated 8.3 million ounces of gold and 6.3 billion pounds of copper. The project is 70 kilometres north of Barrick’s 100% owned Pascua-Lama project, where the company is currently building a mine, and 110 kilometres south of Barrick’s 50%-owned Cerro Casale project. The proximity to the two mines would let Barrick hold down the costs of building a $2.5-billion mine at El Moro. New Gold owns the remaining 30% of El Morro, and has a right of first refusal on Xstrata’s 70% stake. New Gold has until January 11, 2010, to exercise that right....
ALCOA INC., $14.24, New York symbol AA, rose 10% this week after it reported better-than-expected earnings and sales. In the three months ended September 30, 2009, the aluminum maker earned $73 million, down 76.1% from $306 million a year earlier. Earnings per-share fell 81.1%, to $0.07 from $0.37, on more shares outstanding. Alcoa has seen weaker aluminum demand from clients in the automotive, aerospace and construction industries. In response, the company has consolidated plants and laid off workers. These moves should lower Alcoa’s costs by a total of $2.4 billion a year. If you exclude restructuring costs and a gain related to its increased investment in an alumina-refining operation in Suriname, the company would have earned $0.04 a share in the latest quarter. On that basis, analysts were expecting Alcoa to lose $0.10 a share....
AMAZON.COM INC., $95.96, symbol AMZN on Nasdaq, is now selling its Kindle e-book reader in over 100 countries. The reader will ship on October 19, and will cost $279 U.S. Canada has not yet been included in the expansion. That’s because Amazon has not reached a deal with a wireless carrier, such as BCE, Rogers or Telus. Kindle users can download files from Amazon’s Kindle store, which contains over 350,000 books. Most bestsellers and new releases are just $9.99 U.S. each. International users will pay an extra $1.99 U.S. Users can also download leading U.S. and international magazines and newspapers, as well as over 1,200 blogs....
XEROX CORP., $7.32, New York symbol XRX, fell 7% this week after it agreed to buy Dallas-based Affiliated Computer Services Inc. (New York symbol ACS). That’s because investors fear the company is paying too much for this business. ACS sells computer-outsourcing services to large corporations and government agencies. The company helps these clients focus on their main businesses by automating routine functions, such as accounting and buying supplies. Xerox is paying $5.3 billion in cash and shares for ACS, based on Xerox’s current share price. That’s equal to 83% of Xerox’s market cap....
ATLANTIC TELE-NETWORK, $50.19, symbol ATNI on Nasdaq, has raised its quarterly dividend by 11.1%, to $0.20 a share from $0.18. The shares now yield 1.6%. This was the company’s eleventh consecutive annual dividend increase. In June, Atlantic agreed to buy more than 800,000 wireless accounts from Verizon Wireless for $200 million in cash. The subscribers are mostly in rural areas of Georgia, North Carolina, South Carolina, Illinois, Ohio and Idaho. The deal should close by the end of this year. These new accounts will bring Atlantic’s total number of wireless subscribers above one million, up from 200,000 today, and make it one of the largest wireless carriers in the U.S....
MOODY’S CORP., $18.85, New York symbol MCO, fell nearly 20% this week on new allegations that the company deliberately inflated its ratings on mortgage-backed securities and other complex investments. Bond issuers pay fees to rating agencies like Moody’s to rate their bonds. Some investors have sued the company, accusing it of knowingly issuing higher ratings so it didn’t risk losing these fees. Moody’s has denied the allegations. The stock also came under pressure after billionaire investor Warren Buffett lowered his stake in the company to 16.6% from 20.4% last July. As well, a court recently rejected a long-standing defence used by rating agencies that their opinions are protected under free-speech rights....
RUGGEDCOM INC., $22.98, symbol RCM on Toronto, has purchased Israel-based WiNetworks for $9.0 million U.S. WiNetworks is a privately owned company that designs WiMAX equipment. WiMAX is a telecommunications technology that can provide wireless broadband access at a distance of up to 50 kilometres from fixed stations, and five to 15 kilometres from mobile stations. In contrast, most of today’s Wi-Fi networks are limited to only 30 to 100 metres. RuggedCom makes computer-networking equipment that is used in harsh environments. The company has already developed a line of WiMAX products for use in such places....
U.S. industrial production fell 1.1% in May, and by 0.4% in June, but swung to a 1.0% gain in July. Production slipped slightly in August, but was still positive, at 0.8%. That’s good news for 3M. Because of its large product line (it makes over 55,000 different items), the company’s earnings and share price tend to reflect U.S. manufacturing activity. 3M also stands to gain from any uptick in consumer spending. Moreover, the company is aggressively cutting its costs. This should help fuel its earnings growth as the global economy recovers. 3M COMPANY $74 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 698.3 million; Market cap: $51.7 billion; Price-to-sales ratio: 2.3; WSSF Rating: Above Average) is a diversified manufacturing firm. The company was formerly known as Minnesota Mining & Manufacturing. 3M owns a large number of well-known brands. Post-it notes, Scotch tape, Scotch-Brite household-cleaning products, Scotchguard protection and Thinsulate insulation are just a few....
CONAGRA FOODS INC. $22 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 443.1 million; Market cap: $9.7 billion; Price-to-sales ratio: 0.8; WSSF Rating: Above Average) has sold most of its fresh-food and animal-feed businesses over the past few years to focus on its more profitable packaged-food operations. ConAgra’s major brands include Chef Boyardee pasta, Hunt’s ketchup and Peter Pan peanut butter. In the three months ended August 30, 2009, ConAgra’s earnings per share rose 40.7%, to $0.38 from $0.27 a year earlier. These figures exclude unusual items. Lower ingredient costs were the main reason behind the gain. As well, the company stopped making certain low-margin products. Sales fell 3.1%, to $3 billion from $3.1 billion. Consumer products, which account for about two-thirds of ConAgra’s overall sales, rose 1% in the quarter. That’s despite lower sales of Slim Jim meat snacks due to a fire at a North Carolina plant last June....
A weak economy is prompting more consumers to choose cheaper generic brands over brand names. That’s dampened the profits of these four leading consumer-products firms. However, they are doing a good job of cutting their costs. This gives them the ability to lower their prices without hurting their profit margins. PROCTER & GAMBLE CO. $57 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.9 billion; Market cap: $165.3 billion; Price-to-sales ratio: 2.1; WSSF Rating: Above Average) is one of the world’s largest makers of household and personal-care products. Some of its top brands are Tide detergent, Head & Shoulders shampoo, Pampers diapers and Crest toothpaste. Procter is selling some of its slower-growing businesses and shifting its focus to those with better long-term prospects. In November 2008, it sold its Folgers coffee business for a $2-billion gain. Last August, it agreed to sell its prescription-drug division for $3.1 billion. The sale should close later this year....