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
CHIPOTLE MEXICAN GRILL $65.12 (New York symbol CMG.B; SI Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 32.9 million; Market cap: $2.1 billion) is a Denver-based chain of Mexican restaurants. Founded in 1993, Chipotle (pronounced chi- POAT-lay) operates in the fast/casual dining segment, offering higher quality food and better decor and service than fast food chains, at slightly higher prices. In the three months ended June 30, 2008, Chipotle’s revenues rose 24.2%, to $340.8 million from $274.3 million a year earlier. Most of the revenue growth came from new restaurant openings, although comparable same store revenues were up 7.1% as well. Same-store growth resulted from an increase in customer visits and menu price increases. The company opened 49 restaurants in the latest quarter. It currently has over 775 restaurants. Chipotle just opened its first store outside the United States, in Toronto, Canada....
AMAZON.COM $82.13 (Nasdaq symbol AMZN; SI Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 425.9 million; Market cap: $35.0 billion) is launching a new online store called Amazon Video on Demand, which will sell TV programs and movies. Customers can download movies to their computers, or store them at Amazon.com. Customers will also be able to start watching any of the 40,000 movies or TV programs available without having to wait until files are completely downloaded. Unlike most of its competitors such as Apple’s iTunes store, Amazon will use streaming video. That’s similar to programs now available through cable video-on-demand services. Amazon.com is a buy.
Royalty trusts with natural gas exposure are mostly down lately, as higher North American production and lower oil prices have prompted natural gas prices to move down from their highs of $13.50 per million British thermal units in July, to $8.18 U.S. today. These three royalty trusts are cheap in relation to cash flow, based on the latest quarter. If natural gas and oil prices remain low, it would lower cash flow among royalty trusts — but these royalty trusts still have good value, even at lower cash flow levels. Moreover, all three royalty trusts pay out a relatively small percentage of their cash flow to unitholders, so the risk of a distribution cut is low if oil and gas prices drop further. ZARGON ENERGY TRUST $21.75 (Toronto symbol ZAR.UN; SI Rating: Speculative) (403-264- 9992; www.zargon.ca; Shares outstanding: 18.2 million; Market cap: $395.6 million) has oil and gas production assets in Alberta, Manitoba, Saskatchewan and North Dakota. Output is weighted 54% toward gas and 46% to oil....
The world is full of conflicts of interest, especially when it comes to stock advice, so investors need a healthy sense of skepticism. That’s especially so with junior companies, because they sometimes pay for their stock to be recommended in an investment publication. A stock promoter may pay all or a large part of the cost of sending an investment publication to hundreds of thousands of rented names. In return, the investment publication refers to the promoter’s stock by name, and describes it in glowing terms that look like stock advice. The fine print in the mailing or investment newsletter will tell you how much the promoter paid, if the payment was all cash, or if it included free stock or stock options. Disclosed payments sometimes run as high as $800,000. This is perfectly legal, so long as the materials disclose the payments....
CALIAN TECHNOLOGIES $12.23 (Toronto symbol CTY; SI Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 8.2 million; Market cap: $99.8 million) operates in two areas: providing engineering, healthcare and other skilled professional personnel to clients on a contract basis, and producing communications systems. This includes offering a full range of hardware and software systems for testing, operating and managing satellite and other communications systems. In the three months ended June 30, 2008, Calian’s revenues rose 5.7%, to $51.0 million from $48.2 million. Earnings per share rose 33.3%, to $0.40 to $0.30. The company continues to benefit from a stronger market for satellite communication systems. For example, it recently won a contract with DRS Technologies, a U.S.-based supplier of military and electronic systems, to supply radar systems valued at $11.7 million. At the same time, Calian’s personnel contracting division continues to gain from the steady delivery of services to various Canadian federal government departments (59% of revenues), including the Department of National Defence....
GREY ISLAND SYSTEMS INTERNATIONAL $0.28, symbol GIS on Toronto, moved up this week after reporting record revenues and earnings. In the three months ended June 30, 2008, Grey Island’s revenues rose 50.1%, to $5.8 million from $3.8 million a year earlier. The company earned $440,795 or $0.005 a share, compared to a loss of $336,682 or $0.004. Grey Island had positive cash flow of $777,879 or $0.009 a share in the latest quarter, compared to negative cash flow of $69,470 or $0.0008 a share. The company holds $11.3 million or $0.15 a share in cash, and has almost no debt. Grey Island continues to successfully expand in the United States. In the latest quarter U.S. sales rose 84.9% to $4.6 million (78% of total revenues), offsetting a 10.4% decrease in Canadian sales to $1.3 million. Grey Island is an Internet-based automated vehicle location and mobile data services provider for the fleet management market. The company is building a growing customer base of mainly municipal and state government customers....
THE BOEING CO. $65.56, New York symbol BA, has asked the U.S. Air Force for more time to prepare a new bid for a major contract to build refueling tanker planes. The company had previously lost this contract to a joint venture formed by Northrop Grumman Corp. and Europe’s Airbus. However, Boeing claimed the Air Force made mistakes in evaluating the original offers, and got it to re-open the bidding. Meanwhile, Boeing’s military operations continue to win new orders, including a $4.3 billion, multi-year contract to build 191 Chinook helicopters for the U.S. Army. To put that in perspective, Boeing’s annual revenue is roughly $67 billion. As well, demand for its new 787 Dreamliner commercial jet remains strong despite production delays....
BAFFINLAND IRON MINES, $1.68, symbol BIM on Toronto, continues to enter into agreements to sell iron ore from its proposed Mary River project on Baffin Island. It will now sell up to 1.8 million tonnes of ore per year to Italian steel producer Riva Fire SpA. The sale to Riva Fire is the company’s first deal with an Italian steelmaker. However, it’s the fifth letter of intent Baffinland has signed with European steelmakers. This includes one Austrian and three German steelmakers. Riva Fire’s 1.8 million tonnes brings Baffinland’s European commitments to 8 million tonnes. That’s half of the 16 million tonnes it plans to sell in the European market. Baffinland plans to start building an open-pit mine in 2010, with completion scheduled for 2014. It then hopes to produce 18 million tonnes of ore per year for over 21 years....
HEWLETT-PACKARD CO. $47.06, New York symbol HPQ, gained 5% this week after it reported earnings that exceeded consensus forecasts. In its third fiscal quarter ended July 31, 2008, earnings rose 21.1% to $0.86 a share from $0.71 a year earlier. Most of the gains came from lower operating costs. Revenue rose 10.2%, to $28.0 billion from $25.4 billion, thanks to strong sales of notebook computers. Growing demand for software and services is also helping Hewlett offset its reliance on printers. As well, the company benefited from the weak U.S. dollar, which makes its products more affordable in overseas markets. Hewlett-Packard is a buy....
BROADRIDGE FINANCIAL SOLUTIONS INC. $19.76, New York symbol BR, offers services to the investment industry in three main areas: investor communications; securities processing; and transaction clearing. Broadridge mails and processes 70% of all proxy votes. The company stands to gain from the increasing complexity of securities regulations and increasing levels of share ownership. Despite volatile investment industry conditions, Broadridge’s earnings in the fiscal year ended June 30, 2008 rose 2.4%, to $218.5 million from $213.3 million in the prior year. Earnings per share rose 1.3%, to $1.55 from $1.53, on more shares outstanding. These figures exclude unusual items. Revenue rose 3.3%, to $2.21 billion from $2.14 billion. Broadridge also raised its quarterly dividend 16.7%, from $0.06 a share to $0.07. The new annual rate of $0.28 yields 1.4%. As well, the company plans to buy back about 1.5% of its stock....