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
WAL-MART STORES INC. $49 plans to buy back up to $15 billion of its stock, probably over the next two years. That’s equal to 8% of its $189-billion market cap. Share buybacks lower the number of outstanding shares, which means they raise earnings per share and other per-share calculations. The recession is also helping Wal-Mart attract shoppers who would normally avoid discount stores. Buy. C.R. BARD INC. $74 has raised its dividend by 6.3%, to $0.17 a share from $0.16. The new annual rate of $0.68 yields 0.9%. Buy. HEWLETT-PACKARD CO. $37 has formed a marketing alliance with Alcatel-Lucent, a telecom equipment maker. This should make it easier for Hewlett to bundle its computer servers with Alcatel Lucent’s switches and routers and sell these to businesses as discounted bundles. Hewlett feels the deal could generate billions of dollars for it over the next 10 years. Buy.
FEDEX CORP., $51.45, New York symbol FDX, fell 3% this week, despite reporting better-than-expected earnings. In the fiscal year ended May 31, 2009, FedEx’s earnings fell 91.3%, to $98 million, or $0.31 a share. The company earned $1.1 billion, or $3.60 a share, in the prior year. The drop was largely caused by a $1.2-billion writedown of goodwill related to its 2004 purchase of Kinko’s Inc. (now called FedEx Office), a chain of stores that sell printing and copying services. Accounting rules force companies to write down goodwill if the underlying assets are no longer worth what the company originally paid for them. So far, FedEx has written off about 70% of the $2.4 billion it paid for Kinko’s. The charge also included a goodwill writedown related to a 2006 purchase of a regional trucking firm. Without these charges, earnings per share fell a more modest 35.5%, to $3.76 from $5.83. Still, that beat the $3.66 a share that analysts were expecting....
AEROPOSTALE INC., $35.02, symbol ARO on New York, opened the first of its new kids’ stores, “P.S. from Aeropostale,” on Thursday. The store is in the Palisades Mall in West Nyack, New York, just north of New York City. Aeropostale plans to open about nine more stores, mostly in the New York metropolitan area, this year. It also will launch an e-commerce site, www.ps4u.com. P.S. from Aeropostale is aimed at seven-to-12-year-old elementary-school students. The company’s more than 900 Aeropostale stores mainly target 14- to 17-year-old women and men. Both chains offer active-oriented clothing that has a reputation for high quality and low prices. The company will price comparable items at P.S. from Aeropostale about 10% to 15% below those at its main Aeropostale stores....
AEROPOSTALE INC. $34.67 (New York symbol ARO; SI Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 67.5 million; Market cap: $2.3 billion) is a mall-based retailer of casual clothing and accessories. The company, which now has more than 900 stores, mainly targets 14- to 17-year-old women and men. Its active-oriented clothing has a reputation for high quality and low prices. In the quarter ended May 2, 2009, Aeropostale’s sales rose 21.3%, to $408 million from $336.3 million a year earlier. Earnings rose 81%, to $31.7 million, or $0.47 a share, from $17.5 million, or $0.26. Aeropostale’s strong results continued in May, when it reported that its same-store sales jumped 19% from a year earlier. If you include new stores, its total May sales jumped 30%. In contrast, its main rivals’ sales fell: Abercrombie & Fitch dropped 28%, American Eagle fell 7% and The Gap was down 6%....
I am pleased to announce the launch of our new web site, TSI Network (www.tsinetwork.ca). Building on our four newsletters (Canadian Wealth Advisor, Stock Pickers Digest, The Successful Investor and Wall Street Stock Forecaster), the site contains archives of over 2,000 articles on individual investments. I’m the host of TSI Network. Every day, Monday to Friday, I post free updates on issues that matter to you — the individual investor. TSI Network lets you access your newsletters and reports from anywhere in the world. Its search function will make finding a particular company or topic easy....
BROADRIDGE FINANCIAL SOLUTIONS $16.60 (New York symbol BR: SI Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 140.3 million; Market cap: $2.3 billion) has bought Access Data Corp. for an undisclosed amount. Access Data sells software and related services to financial firms. These include over 40 mutual fund companies that together manage a combined $3 trillion of mutual fund assets. Adding Access Data broadens Broadridge’s existing services and expands its customer base....
LEON’S FURNITURE LTD. $9.99 (Toronto symbol LNF; SI Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.7 million; Market cap: $706.2 million) has built its chain of over 60 furniture stores on its four main strengths: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; strong after-sales service; and aggressive TV, radio and print advertising. In the three months ended March 31, 2009, Leon’s revenue fell 0.8%, to $195.2 million from $196.4 million. Earnings per share fell 24%, to $0.12 from $0.16. Leon’s revenue fell mostly because the recession is prompting many consumers to put off buying new furniture. Still, the company gained market share, mainly because it advertised heavily to promote its 100th anniversary. This likely helped Leon’s keep its revenue drop small....
NISSAN MOTOR $11.93 (Nasdaq symbol NSANY; SI Rating: Above Average) (310-771-3111; www.nissanmotors.com; Shares outstanding: 2.3 billion; Market cap: $27 billion) has opened its first plant in Russia. The company will make Teana luxury sedans and X-Trail sport-utility vehicles at the $200-million facility, which is capable of producing 50,000 vehicles a year. Nissan’s plant is located in the St. Petersburg industrial zone. Manufacturers get tax breaks for setting up operations there, and benefit from a nearby port on the Baltic Sea. As well, Russia has placed high tariffs on imported vehicles. This makes it more advantageous for companies like Nissan to build plants there. Nissan Motor is still a buy.
Many oil and gas trusts have risen lately, along with oil prices, although natural-gas prices remain near their lows. Even so, these three trusts remain cheap in relation to their forecast 2009 cash flows. ZARGON ENERGY TRUST $16 (Toronto symbol ZAR.UN; SI Rating: Speculative) (403-264-9992; www.zargon.ca; Units outstanding: 22.4 million; Market cap: $359.0 million) produces oil and gas in Alberta, Manitoba, Saskatchewan and North Dakota. Its output is weighted 51% toward natural gas and 49% to oil. In the three months ended March 31, 2009, Zargon’s production rose 2.2%, to 9,213 barrels of oil equivalent per day (this measurement includes natural gas) from 9,015. As well, Zargon recently paid $41.4 million for Masters Energy. This will add 1,275 barrels of oil equivalent per day to Zargon’s production, bringing it to an expected average of 10,200 barrels per day this year....
REITMANS (CANADA) LTD. $14.25 (Toronto symbol RET.A; SI Rating: Extra Risk) (514-384-1140; www.reitmans.com; Shares outstanding: 70.8 million; Market cap: $1 billion) reports that its earnings fell 57.4% in the three months ended May 2, 2009, to $7.8 million, or $0.11 a share. The retailer earned $18.4 million, or $0.26 a share, a year earlier. Sales rose 1.5%, to $231.7 million from $228.3 million. Same-store sales fell 0.8%. The recession continued to hurt Reitmans’ sales and profits in the latest quarter. The weaker Canadian dollar was also a factor: Reitmans buys as much as 80% of its clothing from China, but it pays these suppliers in U.S. dollars. It also buys its inventory in advance, so its lower selling prices significantly lowered its profit margins. Reitmans holds cash of $182.6 million, or $2.60 a share. It pays an $0.18 quarterly dividend, which gives it a high 5.1% yield....