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
COMPUTER MODELLING GROUP $6.80 (Toronto symbol CMG; SI Rating: Speculative) (403- 531-1300; www.cmgl.ca; Shares outstanding: 17.3 million; Market cap: $101.4 million) is a computer software technology and consulting company specializing in the oil and gas industry. Its software provides engineers with oil and gas reservoir simulation, and three-dimensional visualization and animation. The company has over 330 clients worldwide in 40 countries. Computer Modelling’s revenues in the three months ended September 30, 2008 rose 57.1%, to $9.6 million from $6.1 million. Earnings more than doubled to $3 million from $1.4 million a year earlier. Earnings per share rose 88.9%, to $0.17 from $0.09 on more shares outstanding. Cash flow per share doubled, to $0.20 from $0.10. Strong oil and gas industry exploration spending continues to boost Computer Modelling’s revenues and earnings. The company holds cash of $25.2 million or $1.46 a share and has no debt. It spent $2 million, or a high 20.6% of revenues, on research and development in the latest quarter....
AMAZON.COM $35.84 (Nasdaq symbol AMZN; SI Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 428.8 million; Market cap: $15.4 billion) reports that in the three months ended September 30, 2008, profits rose 47.5%, to $118 million or $0.28 a share from $80 million or $0.19 a share a year earlier. Revenues rose 30.7%, to $4.3 billion from $3.3 billion. Despite the improved results, Amazon has now lowered its 2008 sales forecast to between $18.5 billion and $19.5 billion, down from $19.4 billion to $20.1 billion previously. The company anticipates a weakening economy and slower consumer sales for the rest of this year at least. Amazon continues to win market share by lowering prices — and it has kept profit margins high with its heavy investments in cost-cutting infrastructure. We feel its long-term growth prospects remain strong....
AASTRA TECHNOLOGIES $8.28 (Toronto symbol AAH; SI Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 14.8 million; Market cap: $122.7 million) develops and markets products and systems for accessing communication networks, including the Internet. In the three months ended September 30, 2008, Aastra’s revenues rose 59%, to $224.5 million from $141.1 million. The increase came mostly from the acquisition of the enterprise communications business of Swedish telecom giant Ericsson earlier this year. Despite the higher sales, earnings in the latest quarter fell 63.5%, to $2.6 million or $0.17 a share, from $7.1 million or $0.44 a share. Earnings in the latest quarter included a $10 million pre-tax loss on the Ericsson business. However, the company believes the Ericsson business can reach break-even levels early next year. Without the Ericsson loss, earnings per share would have been $0.73 in the latest quarter....
As you can see, more than a quarter of our recommendations are U.S. stocks. We’ve long felt that Canadians should have around a quarter of their portfolios in U.S. stocks. This advice helped moderate our readers’ losses in the bear market. The U.S. dollar bottomed out around $0.92 Cdn. a little more than a year ago, and is now around $1.23 Cdn. Some investors think the U.S. dollar has gone up too far and too fast. They wonder if they should sell their U.S. stocks, in hopes of buying them back when the U.S. dollar settles down....
ALIMENTATION COUCHE-TARD $15.50 (Toronto symbol ATD.B: SI Rating: Extra risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 193.1 million; Market cap: $3.0 billion) is the largest convenience store operator in Canada, with over 2,000 stores. It also has more than 3,000 U.S. stores in 28 states. Metro Inc. owns 10.3% of the company. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K banner. It sells fuel at 65% of its 4,000 company-operated stores. Couche-Tard also has about 3,500 Circle K licensed stores located in Japan, Hong Kong, China, Indonesia, Guam, Macao and Mexico. In the three months ended July 20, 2008, revenues rose 20.9%, to $4.3 billion from $3.6 billion a year earlier. (All figures except share price and market cap in U.S. dollars.) Excluding one-time items, earnings per share fell 29.4%, to $0.24 from $0.34. That was largely due to a one-time tax expense, plus higher operating costs. Cash flow per share fell 8.8%, to $0.52 from $0.57....
One of the brightest signs in today’s market is that many great stocks now trade below 10 times earnings. That’s especially true of high-quality technology issues, since they spend so heavily on research, which gets written off against earnings like a routine expense. Low p/e ratios are also particularly appealing at times when interest rates are low, as they are now. Of course, earnings could drop next year and push up those p/e ratios. Stock prices could move lower, for a variety of reasons. But that’s always a risk. To profit best, you need to invest mainly in well-established companies that are likely to recover from the economic downturn and go on to produce still higher earnings in the future. KINGSWAY FINANCIAL SERVICES, $5.98, symbol KFS on Toronto, met on November 21 with representatives of New York-based money management company and shareholder activists, The Stilwell Group....
One of the brightest signs in today’s market is that many great stocks now trade below 10 times earnings. That’s especially true of high-quality technology issues, since they spend so heavily on research, which gets written off against earnings like a routine expense. Low p/e ratios are also particularly appealing at times when interest rates are low, as they are now. Of course, earnings could drop next year and push up those p/e ratios. Stock prices could move lower, for a variety of reasons. But that’s always a risk. To profit best, you need to invest mainly in well-established companies that are likely to recover from the economic downturn and go on to produce still higher earnings in the future. CAMPBELL SOUP CO. $31.88, New York symbol CPB, earned $260 million in its first fiscal quarter ended November 2, 2008, down 3.0% from $268 million a year earlier. However, earnings per share rose 2.9%, to $0.71 from $0.69, on fewer shares outstanding. If you disregard restructuring costs and losses on commodity hedging contracts, earnings per share in the latest quarter would have grown 11.6% to $0.77. Sales grew 3.0%, to $2.25 billion from $2.19 billion, mostly due to a 7% rise in prices for the company’s products....
CALIAN TECHNOLOGIES, $8.50, symbol CTY on Toronto, operates in two areas. The BTS division (Business and Technology Services) provides engineering, healthcare and other skilled professional personnel to clients on a contract basis. The SED division (Systems Engineering) offers a full range of hardware and software systems for testing, operating and managing satellite and other communications systems. In the three months ended September 30, 2008, Calian’s earnings rose 27.1%, to $2.7 million $0.33 a share from $2.1 million or $0.26 a share a year earlier. Cash flow per share rose 15.2%, to $0.38 from $0.33. Revenues rose 7%, to $48.9 million from $45.7 million. In the latest quarter, Business and Technology Services revenues rose 7.4%, to $33.7 million from $35.3 million. Systems Engineering revenues rose 6.1%, to $15.2 million from $14.3 million. Stronger demand for Calian’s products and services combined with more efficient project...
HEWLETT-PACKARD CO. $34.64, New York symbol HPQ, has reported preliminary earnings that exceed consensus forecasts. In its fourth fiscal quarter ended October 31, 2008, the company earned $1.03 a share before unusual items, up 19.8% from $0.86 a year earlier. The consensus estimate was for $1.00 a share. Sales grew 18.7%, to $33.6 billion from $28.3 billion. If you disregard Hewlett’s recent purchase of Electronic Data Systems Corp., sales improved 5%. Despite the downturn in consumer spending, Hewlett expects that cost cuts will let it earn $0.94 a share in the first quarter of fiscal 2009, up 9.3% from $0.86 a year earlier. As well, the company’s large international operations (two-thirds of its revenue) and diverse range of products and services should continue to help it expand sales. Hewlett-Packard is a buy....
RUSSEL METALS, $20.30, symbol RUS on Toronto, is acquiring Norton Metal Products, a privately held Fort Worth, Texas-based metals service center in an all-stock purchase (no terms were disclosed). Norton has annual revenues of about $70 million. That’s small in relation to Russel’s annual revenues of over $2.6 billion. However, Norton is a known brand name in its local region, and will help Russel continue to expand in the southern U.S. market. Russel reported record quarterly earnings in the three months ended September 30, 2008. Profits more than tripled, to $91.5 million or $1.45 a share from $27.9 million or $0.44 a share a year earlier. Revenues rose 53%, to $954.9 million from $624.3 million. In the latest quarter, 34% higher steel prices boosted sales at its metals service centers by 50%. The metals service centers account for 53% of Russel’s revenues and 47% of its profits. Strong U.S. energy operations and growing Alberta oil sands business helped push up sales of energy tubular products by 86%....