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.
Read More
Close
Growth Stocks Library Archives
AMERICAN EXPRESS CO. $19.99, New York symbol AXP, has received approval to operate as a bank holding company. This will give the company greater access to government-sponsored financial assistance programs. In addition, it will broaden its access to new capital. The change will also let Amex open branches and take deposits, if it wants to. However, the company will probably continue to focus on its credit card and travel businesses, instead of building up a traditional branch network....
As I’ve said several times in the past few weeks, you can only spot a market bottom (a reversal in a falling trend in stock prices) in hindsight. Then too, a market can hit bottom, put on a healthy bounce, then go back down to the bottom once again before going on to a lasting rise. But I do feel that a lot of the risk of further decline is now out of the market. My view is that stocks are likely to move substantially higher in the next 6 months to a year, if not sooner. GOODYEAR TIRE & RUBBER CO., $7.14, symbol GT on New York, jumped earlier this week after it reported profits in the latest quarter that exceeded consensus expectations. However, the shares have since moved lower. Earnings excluding one-time items fell 43.4%, to $0.43 a share from $0.76 a share in the three months ended September 30, 2008. However, that beat the consensus expectations of $0.33 a share. Sales rose 2.1%, to $5.2 billion from $5.1 billion a year earlier....
As I’ve said several times in the past few weeks, you can only spot a market bottom (a reversal in a falling trend in stock prices) in hindsight. Then too, a market can hit bottom, put on a healthy bounce, then go back down to the bottom once again before going on to a lasting rise. But I do feel that a lot of the risk of further decline is now out of the market. My view is that stocks are likely to move substantially higher in the next 6 months to a year, if not sooner. VERIZON COMMUNICATIONS INC. $30.05, New York symbol VZ, owns 55% of Verizon Wireless, a joint venture with UK-based Vodafone. Verizon Wireless has now received most of the regulatory approvals it needs for its acquisition of privately held Alltel Corp., which provides wireless services to 13 million customers in mainly rural areas of 34 U.S. states. Regulators imposed several conditions on the takeover, including exiting certain markets. However, these conditions should not significantly diminish the future profitability of the combined operations, which will be the largest wireless provider in the United States with over 80 million customers. Verizon Wireless aims to complete the takeover in the next few weeks....
IDEARC INC. $0.70 (New York symbol IAR) gets 90% of its revenue from printed products, such as its Yellow Pages telephone directories. That makes it vulnerable to slowing consumer spending and weaker advertising demand. Idearc’s long-term debt of $9 billion is now over 70 times its market cap. High interest costs will slow the expansion of its faster-growing Internet operations. Consequently, we’ve lowered Idearc’s WSSF Rating from “Average” to “Speculative”. Hold. TIM HORTONS INC. $23 (New York symbol THI) plans to build and operate up to 20 full-service restaurants and 62 self-serve kiosks inside Tops supermarkets in New York State and Western Pennsylvania. This deal will give Tim Hortons 488 outlets in the U.S. It has over 2,850 restaurants in Canada. However, Tim Hortons p/e of around 18 is high considering it faces rising costs for food and labor. Hold. AUTODESK INC. $23 (Nasdaq symbol ADSK) continues to spend a high 25% of its revenue on research. New software products from these outlays should help spur strong earnings growth when the economy rebounds. Buy.
GENERAL MILLS INC. $64 (New York symbol GIS; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 334.1 million; Market cap: $21.4 billion; WSSF Rating: Above average) is the second-largest cereal maker in the United States after Kellogg. Leading brands include Cheerios, Total and Wheaties. The company also makes a variety of other foods, including baking mixes (Betty Crocker), dinner mixes (Hamburger Helper), canned and frozen vegetables (Green Giant), and yogurt (Yoplait). Wal-Mart accounts for about 20% of its total sales. Rising prices for raw materials such as grains, corn and milk have dampened General Mills’ recent earnings growth along with those of other food stocks.
Hedges help food stocks control commodity costs
...
PEPSICO INC. $54 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $86.4 billion; WSSF Rating: Above average) aims to improve its long-term profitability with a new restructuring plan that should cut its expenses by $1.2 billion over the next three years. That will put PepsiCo in a better position to handle rising costs for grains and fuel. The company gets 40% of its revenue from overseas, so these savings will also help it cope with the rising U.S. dollar. Meanwhile, PepsiCo earnings in the third quarter of 2008 fell to $0.99 a share (total $1.6 billion) from $1.06 a share ($1.7 billion) a year earlier. If you exclude losses on hedging, PepsiCo would have earned $1.06 a share in the latest quarter. Sales grew 9.8%, to $11.2 billion from $10.2 billion, thanks partly to rising product prices. Total snack volume rose 2%, while beverages grew 3%. PepsiCo is a buy.
SYMANTEC CORP. $14 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 839.1 million; Market cap: $11.7 billion; WSSF Rating: Average) has agreed to acquire UK-based MessageLabs for $695 million in cash. MessageLabs offers online software that helps users protect their email and instant messaging services from spam and junk emails. Symantec plans to use MessageLab’s technology to develop other online security products. Symantec holds cash of $2.3 billion or $2.70 a share, so it can easily afford this purchase. Symantec is a buy. J.C. PENNEY CO. $20 (New York symbol JCP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 222.1 million; Market cap: $4.4 billion; WSSF Rating: Average) plans to launch two new lines of women’s clothing by noted fashion designers Allen B. Schwartz and Charlotte Ronson. The company hopes these moderately priced brands will help it lure increasingly cost-conscious shoppers away from high-end boutique clothing shops....
APPLE INC. $97 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 888.3 million; Market cap: $86.2 billion; WSSF Rating: Average) has dropped 40% in the past two months, as investors fear that a slowing economy will cut consumer demand for electronics. However, Apple’s customers tend to be more loyal than other computer buyers. The strong growth of its iTunes online store also gives it steady revenue from music and software downloads, and cuts its reliance on new hardware sales. As well, Apple recently launched a new line of notebook computers, and cut the price of its older models. That should help spur sales over the busy Christmas shopping season....
ARKANSAS BEST CORP. $28 (Nasdaq symbol ABFS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 25.3 million; Market cap: $708.4 million; WSSF Rating: Average) provides less-than-truckload shipping services, which combine freight from multiple customers into a single vehicle. Freight carried by the company includes food, textiles, apparel and furniture. Higher fuel costs have hurt Arkansas Best’s earnings growth this year. As well, a new deal with its main union increased its labor costs. However, the new union contract gives Arkansas Best more flexibility over schedules and other items. That should let it expand same-day or next-day delivery service to the western United States. Right now, the company operates mainly in the eastern two-thirds of the country....
These two growth stock picks face slowing growth caused by weakness in the economy, but fuel is a key cost for both of them, so these growth stock picks stand to gain from the recent plunge in oil prices. ARKANSAS BEST CORP. $28 (Nasdaq symbol ABFS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 25.3 million; Market cap: $708.4 million; WSSF Rating: Average), provides less-than-truckload shipping services, which combine freight from multiple customers into a single truck. Arkansas Best carries freight that includes food, textiles, apparel and furniture. Higher fuel costs have hurt Arkansas Best’s earnings growth this year. As well, its labour costs increased because of a new deal with its main union....