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
ALARMFORCE INDUSTRIES $4.80 (Toronto symbol AF: SI Rating: Speculative) (1-800-267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $58.4 million) sells two-way voice alarm systems and monitoring services in Canada and the U. S. AlarmForce’s system differs from others because it lets emergency operators verify an alarm by establishing immediate, two-way voice contact with homeowners. It then dispatches security personnel to the client’s home. If intruders are present, the two-way contact can frighten them away. The company has used radio and television advertising to gain a high profile. It gives its system away in order to add new subscribers. In return, subscribers pay $25 a month for a monitoring service and sign on with a three-year contract. AlarmForce makes and owns each system....
AMAZON.COM $83 (Nasdaq symbol AMZN; SI Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 431.8 million; Market cap: $35.8 billion) plans to buy privately held Zappos.com for $807 million in common stock. Zappos is an online seller of shoes, clothing and accessories. Zappos posted roughly $1 billion in sales last year (Amazon.com had $19.2 billion). Zappos was launched in 1999, and was one of the first companies to succeed in selling footwear on the Internet. It stocks a range of styles, and lets customers order and return multiple pairs without paying extra shipping. Zappos’s management will remain in place, and the company will still be headquartered in Las Vegas....
CAMECO CORP. $31.11 (Toronto symbol CCO; SI Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 392.6 million; Market cap: $12.2 billion) is the world’s largest uranium producer. Its large, high-grade reserves and low-cost operations, significant market share and access to a number of sources of uranium give it a strong competitive position. Cameco gets most of its uranium from its 70%-owned McArthur River mine and the Rabbit Lake mine, both of which are in Saskatchewan. The company also owns the Crow Butte and Highland mines in the U.S. Through subsidiaries, Cameco holds a 31.6% interest in Ontario’s Bruce Power partnership, which operates four of the eight reactors at the Bruce plant, North America’s largest nuclear-power complex....
TIM HORTONS $31.78 (Toronto symbol THI; SI Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 181 million; Market cap: $5.8 billion) reports that its revenue rose 8.9% in the three months ended June 28, 2009, to $556.1 million from $510.7 million a year earlier. Canadian same-store sales rose 1.7%, and U.S. same-store sales rose 3.3%. Earnings climbed 3.7%, to $77.8 million from $75 million. Earnings per share gained 4.9%, to $0.43 from $0.41, on fewer outstanding shares. The higher results were partly the result of the 25 new stores Tim Hortons opened during the quarter. Ten of these were in the U.S....
GREY ISLAND SYSTEMS INTERNATIONAL $0.34 (Toronto symbol GIS; SI Rating: Speculative) (877-434-4844; www.interfleet.com; Shares outstanding: 73.9 million; Market cap: $24.8 million) has received a friendly takeover offer from WebTech Wireless (symbol WEW on Toronto). Grey Island shareholders will receive 0.30 of a WebTech share for each of their Grey Island shares. Based on WebTech’s current trading price, the offer is worth $0.38 per Grey Island share. We’re sorry to see Grey Island get taken over. The company continues to sign new contracts, and we still think it has lots of potential. However, the deal has the support of Grey Island’s board of directors and management, who together hold 22.6% of its outstanding shares....
FAIR ISAAC CORPORATION $22.51 (New York symbol FICO; SI Rating: Average) (415-472-2211; www.fico.com; Shares outstanding: 48.9 million; Market cap: $1.1 billion) has changed its ticker symbol on the New York exchange from FIC to FICO. The new symbol is part of the company’s plan to change its corporate identity. The company’s main business remains its FICO software, which lets lenders of all types calculate a customer’s credit score. Fair Isaac Corporation is still the company’s legal name. The stock has rebounded sharply from last March’s low of $9.76, as aggressive cost cuts are letting Fair Isaac expand profits in the face of declining sales. Recent upgrades to its FICO scoring system should also help the company gain from increasing demand for credit scores as the economy recovers....
FAIRFAX FINANCIAL HOLDINGS $364.55 (Toronto symbol FFH: SI Rating: Average) (416-367- 2612; www.fairfax.ca; Shares outstanding: 16.8 million; Market cap: $6.1 billion) is a financial-services holding company with assets of $27.9 billion. Fairfax engages in insurance, reinsurance and investment management. 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 or so 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. It also sells insurance in Asia. In the three months ended June 30, 2008, Fairfax’s earnings jumped to $275.4 million, or $15.65 a share, from $27.6 million, or $0.84. The latest quarter included $214.7 million of net gains on investments....
BROADRIDGE FINANCIAL SOLUTIONS INC., $20.30, New York symbol BR, reported this week that its earnings rose 16.2% in the fiscal year ended June 30, 2009, to $1.58 a share from $1.36 in the prior year. If you disregard unusual items, including a gain on the early retirement of debt and a tax credit that lowered its effective income-tax rate, Broadridge’s earnings per share rose 6.3%, to $1.51 from $1.42. The improved earnings came despite difficult conditions in the financial sector. Broadridge serves the investment industry in three main areas: investor communications; securities processing; and transaction clearing, trade settlements and other back-office operations. Its clients include 250 banks, 500 mutual-fund families and 5,000 publicly listed companies....
GREY ISLAND SYSTEMS INTERNATIONAL $0.36, symbol GIS on Toronto, has risen almost 30% over the last week. That’s after it received a friendly takeover offer from WebTech Wireless (symbol WEW on Toronto). Under the offer, Grey Island shareholders will receive 0.30 of a WebTech share for each Grey Island share they hold. Based on WebTech’s current trading price, that translates to $0.40 per Grey Island share. WebTech’s technology integrates the Global Positioning System (GPS), wireless communications and the Internet to provide fleet operators with real-time information about the location and status of their vehicles....
PEPSICO INC., $57.74, New York symbol PEP, increased its offer to buy its two main bottlers: Pepsi Bottling Group Inc. (New York symbol PBG) and PepsiAmericas, Inc. (New York symbol PAS). Both have now accepted PepsiCo’s offer, which is worth $7.8 billion. To put this in context, PepsiCo earned $1.7 billion, or $1.06 a share, in the second quarter of 2009. PepsiCo already owns 33% of Pepsi Bottling Group and 43% of PepsiAmericas. The company first offered to buy these bottlers last April for a total of $6 billion in cash and shares, but they rejected this amount as insufficient. In response, PepsiCo launched the new bid, which is a 30% increase over its first offer. The deal should close later this year, or in early 2010, and will give PepsiCo control over 80% of its North American beverage volumes. By consolidating plants and administrative functions, the company feels it can lower its annual costs by $300 million by 2012. That should add $0.15 a share to its annual earnings. Owning these bottlers will also make it easier for PepsiCo to launch new products, and react more quickly to changing consumer tastes in different regions....