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
NEWELL RUBBERMAID INC., $6.91, New York symbol NWL, has cut its quarterly dividend by 52.4%, to $0.05 a share from $0.105. The new annual rate of $0.20 yields 2.9%. Newell makes plastic storage bins, tools, window blinds, pens and a number of other household items. Aside from Rubbermaid, Newell’s brands include Sharpie, Paper Mate, Waterman and Levolor. The recession is prompting Newell’s customers to switch to cheaper, generic versions of the company’s products. The lower dividend should save Newell about $61 million a year. (In 2008, Newell earned $338.7 million, or $1.22 a share before unusual items.) The company needs the cash to repay $750 million in debt that comes due during the second half of this year. If you include long-term borrowings, Newell’s total debt was $2.9 billion at the end of 2008....
FPL GROUP INC. $52 (New York symbol FPL; Income Portfolio, Utilities sector; Shares outstanding: 408.9 million; Market cap: $21.3 billion; Price-to-sales ratio: 1.3; WSSF Rating: Average) operates through two wholly owned subsidiaries. Florida Power and Light Company (which accounted for 71% of FPL Group’s 2008 revenue and 46% of its earnings) is a regulated utility with 4.5 million electricity customers in eastern and southern Florida. This subsidiary’s power stations operate under some form of government regulation. This limits the prices Florida Power and Light can charge, but it also provides steady revenue streams. FPL Group also owns NextEra Energy Resources, which operates unregulated electrical-power projects in Canada and 16 U.S. states. NextEra is the leading producer of wind power in the U.S., with 25% of the country’s total wind-power capacity....
H&R BLOCK INC. $17 (New York symbol HRB) has processed 3.2% fewer tax returns through March 15, 2009, than a year earlier. That’s because more people filed earlier in 2008 in order to receive government stimulus cheques. However, revenue rose 1.1% because H&R Block charged higher fees to clients with complex returns. Buy. GANNETT CO. INC. $2.35 (New York symbol GCI) has cut its quarterly dividend by 90%, to $0.04 a share from $0.40. The new annual rate of $0.16 yields 6.8%. Gannett continues to cut costs, including layoffs and unpaid leave for employees. These moves should help it survive. Buy. MCGRAW-HILL COMPANIES INC. $23 (New York symbol MHP) has increased its dividend each year for the past 36 years. Last month, the company set the new annual rate at $0.90 a share (3.9% yield). Buy....
NEW GOLD $2.18 (Toronto symbol NGD; SI Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 212.8 million; Market cap: $463.9 million) has agreed to buy Western Goldfields (symbol WGI on Toronto) in a $292-million friendly takeover offer. New Gold is offering one of its shares and $0.0001 in cash for each share of Western Goldfields. New Gold will issue a total of 135 million shares to pay for the purchase. New Gold already owns and operates the Cerro San Pedro gold/silver mine in Mexico, which is expected to produce between 90,000 and 100,000 ounces of gold this year. The same amount is forecast for New Gold’s Peak mine in Australia. Western Goldfields’ sole asset is the Mesquite mine in Imperial County, California. The mine started production last year, and is forecast to produce 140,000 to 150,000 ounces of gold this year....
As you’ll see inside, many companies we follow have piled up hoards of cash. So have individual investors who dumped stocks late in February, when the market fell below November’s lows. Cash on the sidelines is a powerful market and economic indicator. It represents latent buying power that can go to work in a heartbeat, when investors and businesses regain confidence. It’s no guarantee of better times – nothing can ever do that. But it’s one more reason to expect the market rally to continue.
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ADOBE SYSTEMS INC. $21.35 (Nasdaq symbol ADBE; SI Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 524.2 million; Market cap: $11.2 billion) makes software that lets computer users easily create, edit and share documents in the popular PDF format. Graphic designers also use Adobe’s software to create print publications and web pages. In the three months ended February 27, 2009, Adobe’s revenue fell 11.7%, to $786.4 million from $890.4 million. Earnings per share, excluding one-time items, fell 6.3%, to $0.45 from $0.48. In the quarter ending May 31, 2009, Adobe expects to report earnings per share of between $0.31 and $0.38 on revenue of about $700 million....
AASTRA TECHNOLOGIES $18.67 (Toronto symbol AAH; SI Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 13.3 million; Market cap: $248.3 million) has seen its share price more than double since late February when it reported 41% higher cash flow per share, to $1.76 from $1.24 a year earlier. Aastra’s revenues rose 68.7%, to $261.8 million from $155.2 million. The increase was mostly the result of Aastra’s April 2008 purchase of the business communications division of Swedish telecom giant Ericsson. But even if you exclude the Ericsson acquisition, Aastra’s revenues still rose 13.2%. Aastra holds $98.2 million, or $7.35 a share, in cash and has no long-term debt. Aastra continues to expand by buying money-losing product lines that distressed sellers have invested large sums developing. These acquisitions add risk, but, as the Ericsson example shows, Aastra has a good track record of integrating new businesses....
BIRCHCLIFF ENERGY $5.35 (Toronto symbol BIR; SI Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 112.4 million; Market cap: $601.3 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. Birchcliff can now 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....
COMPUTER MODELLING GROUP $9.10 (Toronto symbol CMG; SI Rating: Speculative) (403- 531-1300; www.cmgl.ca; Shares outstanding: 17.3 million; Market cap: $157.4 million) spent $2.2 million, or a high 18.5% of its revenue, on research in the latest quarter. The company’s software models advanced oil and gas recovery techniques. Computer Modelling’s software is attractive to oil and gas producers because it lets them maximize output from existing wells. This helps them generate more cash flow. Computer Modelling has no debt, and holds $28.6 million, or $1.99 a share, in cash. It just raised its quarterly dividend by 7.1%. The shares now yield a high 6.6%....
TUCOWS $0.48 (Toronto symbol TC; SI Rating: Speculative) (1-800-371-6992; www.tucowsinc.com; Shares outstanding: 73.1 million; Market cap: $35.1 million) sells Internet domain names, email and other web-based services to more than 9,000 web hosts and Internet service providers in 100 countries. At www.tucows.com, Tucows maintains a library of over 40,000 pieces of software, most of which is free to the user (donations accepted). Tucows sells advertising on this site, and charges software companies a fee to feature their programs. Tucows makes 74% of its revenue from the over 8,000 domain names it manages. It also sells billing and customer-service software, hosted email, anti-spam services and software for blogs to Internet service providers. Aside from corporate clients, Tucows sells services directly to individual computer users. These include domains, email, blogging software and web-site hosting and creation....