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
RUSSEL METALS $18.75 (Toronto symbol RUS; SI Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 63.3 million; Market cap: $1.2 billion) is one of North America’s largest metals distribution companies. In the three months ended June 30, 2008, Russel’s revenues rose 31.2%, to $856.3 million from $652.8 million a year earlier. Earnings per share jumped to $1.25 from $0.47. High steel prices and steady demand at its metals service centers boosted Russel’s results. Rising U.S. drilling activity and Alberta oil sands activity also strengthened demand for its energy tubular products....
LEON’S FURNITURE $9.80 (Toronto symbol LNF; SI Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.7 million; Market cap: $692.6 million) has moved down lately, along with many other stocks, but also due to investor worries about Canadian housing starts. However, even if housing sales slow down significantly, the company will keep prospering because new homeowners tend to keep buying home furnishings in the first few years of ownership. The company also continues to build new warehouse showrooms and renovate its existing stores to profit from the rising numbers of homeowners over the last few years. This includes a new downtown Toronto location. The store is now under construction, with opening scheduled for early 2009. Leon’s reported 20.2% higher sales in the three months ended June 30, 2008, to $176.7 million from $147 million a year earlier. Excluding one-time items, earnings per share rose 14.3%, to $0.16 from $0.14....
AMERIGO RESOURCES $0.60 (Toronto symbol ARG; SI Rating: Speculative) (604-681 -2802; www.amerigoresources.com; Shares outstanding: 93.4 million; Market cap: $56.0 million) processes copper from the tailings (waste rock) from Chile’s El Teniente, the world’s largest underground copper mine. In the three months ended June 30, 2008, Amerigo’s revenues fell 2.6%, to $31.2 million from $32 million a year earlier. (All figures except share price in U.S. dollars.) Earnings per share fell 36.4%, to $0.07 from $0.11. Cash flow per share fell 30.8%, to $0.09 a share from $0.13. Amerigo shares are down lately along with most other junior mining stocks. As well, copper prices have dropped over 41% from a high of $4.10 in June, to $2.40 today. Still, the long-term production outlook for the company is positive, and copper prices should recover with the economy....
TIM HORTONS $27.90 (Toronto symbol THI; SI Rating: Average) (905-845-6511; www.timshortons.com; Shares outstanding: 185.1 million; Market cap: $5.2 billion) continues to focus its U.S. expansion on areas near the Canadian border. That helps it profit from travelling Canadian tourists, as well as from Americans who are already familiar with its brand. Consequently, the company has formed a new alliance with Tops Markets, which operates supermarkets in New York State and Western Pennsylvania. Tim Hortons will open up to 20 full-service restaurants and 62 self-serve kiosks inside Tops stores. This deal will give Tim Hortons 488 outlets in the U.S. It has over 2,850 restaurants in Canada. Tim Hortons trades at 17.3 times its likely 2008 earnings of $1.61 a share. That’s high given it faces rising costs for food and labor....
BIRCHCLIFF ENERGY $5.21 (Toronto symbol BIR; SI Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 112.4 million; Market cap: $585.6 million) is focused on oil and gas exploration, development and production in northwestern Alberta’s Peace River Arch area. Last year, Birchcliff paid Compton Petroleum $263.3 million in cash for light oil production and drilling prospects at Worsely. The light oil assets complement Birchcliff’s gas assets. It can now choose between directing spending to either light oil opportunities or natural gas, depending on market conditions. Birchcliff’s other main interest is its Montney/Doig horizontal gas drilling program at Pouce Coupe. The company continues to drill at Pouce Coupe employing advanced horizontal drilling techniques. This involves drilling development wells sideways or at an angle to reach isolated pockets of oil and gas, or to follow a reservoir spread out in a narrow layer. Horizontal drilling works well in situations where conventional drilling is either impossible or too costly....
SYMANTEC CORP. $14.04 (Nasdaq symbol SYMC; SI Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 839.1 million; Market cap: $11.8 billion) is acquiring privately held UK-based MessageLabs for $695 million in cash. MessageLabs offers online software that helps users protect their email and instant messaging services from spam. MessageLabs gives Symantec exposure to this growing niche market. Symantec also plans to use MessageLab’s technology to develop other online security products. As well, it aims to sell its other products to MessageLabs’ customers. With over 19,000 customers, Message- Labs generated $145 million in sales in the year ended July 31, up 20% from a year earlier. To put that in context, Symantec had revenues of $1.7 billion in the latest quarter....
DUNDEE REIT $19.26 (Toronto symbol D.UN; SI Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 17.1 million; Market cap: $328.4 million) owns and operates 7.2 million square feet of office, industrial and retail properties. It now holds 42 office buildings and 36 industrial properties. GE Real Estate holds a 14.3% voting interest in Dundee. The company continues to focus on properties in western Canada. Earlier this year it acquired a onethird interest in the newly constructed, three-building, 357,000-square-foot IBM Corporate Park in Calgary for $57.3 million. Dundee will manage the fully leased property. It also bought a building at 4370 Dominion Street in Burnaby, B.C. for $11.5 million. Revenues were $45.4 million in the three months ended June 30, 2008, up 18.5% from $38.3 million a year earlier. The best measure of operating performance for a real estate company is cash flow. Dundee’s cash flow per share in the latest quarter was unchanged at $0.76....
The Dow’s 11.1% gain on October 13, 2008 was the fifth biggest percentage gain on record. The 9.8% gain on Toronto the next day was the biggest ever. Markets have been volatile since those big moves. But my view is that governments around the world are now taking the kind of steps that will contain the crisis and eventually restore liquidity in the banking system. The upturn could mark the beginning of the end of the 2007/2008 market downturn and open up a number of tempting new hot stock picks. Even so, aggressive investments should still make up no more than, say, 30% of your portfolio. You can cut risk all the more by taking a conservative approach....
ALARMFORCE INDUSTRIES $3.55 (Toronto symbol AF: SI Rating: Speculative) (1-800-267-2001; www.alarmforce.com; Shares outstanding: 12.1 million; Market cap: $43.1 million) provides two-way voice alarm systems and monitoring services in Canada and the United States. The company has over 87,500 subscribers, with 91% in Canada and 9% in seven U.S. states. AlarmForce’s system is distinctive because emergency operators establish immediate two-way voice contact with homeowners to verify an alarm. It then dispatches security personnel to the client’s home. If intruders are present, the two-way contact can frighten them away. AlarmForce has gained a high profile from radio and TV advertising. It adds new subscribers by giving its system away in return for a monitoring service at $25 a month, with a three-year contract. AlarmForce makes and owns each system....
TOROMONT INDUSTRIES, $22.81, symbol TIH on Toronto, rose this week after it reported that revenues rose 15.8% in the three months ended September 30, 2008, to $578 million from $499.3 million a year earlier. Excluding one-time items, earnings rose 21.3%, to $37.1 million or $0.57 a share, from $30.6 million or $0.47 a share. Toromont is an industry leader in construction equipment, power generation, refrigeration and natural gas compression systems. In the latest quarter, higher compression group revenues boosted sales and earnings. Toromont’s sales to the U.S. natural gas compression market continued to perform especially well, rising 26.2%. Toromont is a buy....