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
TRIMBLE NAVIGATION $31.62 (Nasdaq symbol TRMB; SI Rating: Speculative) (408-481-6914; www.trimble.com; Shares outstanding: 121.4 million; Market cap: $3.8 billion) makes GPS devices and technology for four main markets: 1) Engineering and construction is the biggest contributor to revenue for Trimble, at 55% of revenues. 2) Agriculture GPS products (25% of sales) let farmers cut costs and increase yields by, say, precisely plowing, seeding or fertilizing fields, even at night....
CAMECO CORP. $41.26 (Toronto symbol CCO; SI Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 334.5 million; Market cap: $14.2 billion) will join with Japan’s Mitsubishi Corp. to acquire Rio Tinto’s Kintyre uranium exploration project in Western Australia for $495 million U.S. Cameco will hold a 70% stake in the joint venture. Cameco estimates that the Kintyre deposits range from 62 million to 80 million pounds of uranium. The project still requires state government approval. In the longer term, Cameco is well positioned to participate in the global expansion of nuclear power. However, in the short term, lower uranium prices and delays at Cigar Lake continue to hold back profits....
RUBY TUESDAY, INC. $6.85 (New York symbol RT; SI Rating: Speculative) (865-379- 5700; www.rubytuesday.com; Shares outstanding: 52.8 million; Market cap: $361.7 million) has reported fiscal fourth-quarter earnings that exceeded consensus expectations. In the three months ended June 3, 2008, earnings per share fell 41.3%, to $0.27 from $0.46 a year earlier. However, consensus forecasts were for earnings of just $0.20 a share. Sales fell 4.3%, to $341.4 million from $356.8 million. Ruby Tuesday plans to close 15 underperforming restaurants as their leases expire. It also continues to re-position itself as offering higher-quality food but at higher prices. We think Ruby Tuesday will succeed in improving its menu, service and advertising to attract customers....
CIMAREX ENERGY $61.38 (New York symbol XEC; SI Rating: Extra risk) (303-295-3995; www.cimarex.com; Shares outstanding: 82.9 million; Market cap: $5.1 billion) is an oil and gas explorer and producer primarily focused in western Oklahoma, Kansas, the upper Gulf Coast areas of Texas and South Louisiana, the Permian Basin area of West Texas, plus the Gulf of Mexico. Cimarex’s production averaged 482.8 million cubic feet equivalent per day in the latest quarter. Natural gas makes up 70% of output. Production for the full year 2007 will likely average 485 million cubic feet. In the three months ended March 31, 2008, cash flow per share rose 57.3%, to $4.12 from $2.62. The company’s shares trade at just 3.7 times annual cash flow based on the latest quarter. Long-term debt of $487 million is only 10% of market cap....
IMPERIAL METALS $8.15 (Toronto symbol III; SI Rating: Speculative) (604-669-8959; ww.imperialmetals.com; Shares outstanding: 32.6 million; Market cap: $266.1 million) can now proceed with further development at its Red Chris copper and gold mine in northeast B.C. The Canadian Federal Court of Appeal has overturned a lower court decision that had blocked environmental approvals for the mine. Environmental group MiningWatch Canada had challenged the 2006 environmental approvals. Subsequently, in September, 2007, the lower court ruled that the federal environmental review was incorrect. Imperial acquired the Red Chris property in February, 2007, and aims to build a $228 million open-pit mine on the property. A feasibility study estimates that Red Chris could produce 1.8 billion pounds of copper and 1.2 million ounces of gold over a 25-year mine life. There is also room to add to the deposit through further exploration drilling....
FAIR ISAAC CORPORATION $20.72 (New York symbol FIC; SI Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 48.6 million; Market cap: $1.0 billion) provides products and services that help businesses make better decisions on customer creditworthiness around the world. Its main business is its FICO software, which lets creditors use information about a customer to calculate a credit score. That score lets credit providers decide if they should give a customer a mortgage, a loan or a credit card. Major customers include banks, credit card issuers, insurers, retailers, telecom providers and government agencies. In the three months ended March 31, 2008, Fair Isaac’s revenues rose 1.3%, to $193.2 million from $190.7 million. Sales growth has slowed along with problems in credit and mortgage markets. Earnings per share fell 2.7%, to $0.36 from $0.37, on fewer shares outstanding. If you exclude the costs of Fair Isaac’s current restructuring plan, earnings per share in the latest quarter were up 18.9%, to $0.44....
Despite the bear market underway in the U.S., the resources boom continues here in Canada. Some investors think it will keep on rising indefinitely, due to slower but continuing growth in India and China. Resources prices may be headed much higher in years and decades to come, but they remain cyclical. That means you’ll see periodic collapses along the way. We see signs that high oil prices are having the predictable effect of cutting into demand....
COMPUTER MODELLING GROUP $19.31 (Toronto symbol CMG; SI Rating: Speculative) (403- 531-1300; www.cmgl.ca; Shares outstanding: 8.5 million; Market cap: $164.1 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 March 31, 2008 rose 23.9%, to $9 million from $7.3 million. Earnings per share rose 33.3%, to $0.36 from $0.27. The company holds cash of $23.5 million or $2.76 a share and has no debt. Computer Modelling spent $1.8 million, or a high 20% of revenues, on research and development in the latest quarter. The company pays a quarterly dividend of $0.20 a share, for a high 4.1% yield. It also paid a special $0.25 a share dividend in June, 2008. Last year, the company added Petroleo Brasileiro S.A., Brazil’s state-owned oil company, as a partner in its project to develop leadingedge oil and gas reservoir simulation software. A unit of multinational oil giant Shell International is already a partner with Computer Modelling in this project....
FIRSTSERVICE CORP. $16.91, symbol FSV on Toronto, moved up almost 29% this week after reporting that revenues in the three months ended June 30, 2008 rose 23.6%, to $457.8 million from $370.5 million. (All figures except share price in U.S. dollars.) Earnings per share excluding one-time items rose 6.3% to $0.51 from $0.48. That was well above consensus expectations. FirstService companies include commercial real estate firm, Colliers International, residential property manager, FirstManagement Partners, and property improvements provider, The Franchise Company. FirstService recently completed the sale of its Integrated Security Services division for $187.5 million. It may now use that cash to make acquisitions of companies selling at depressed prices....
SONY CORP. ADRs $37.83, New York symbol SNE, fell roughly 10% this week after it reported earnings that fell short of consensus forecasts. In its first fiscal quarter ended June 30, 2008, earnings fell 39.2%, to $0.31 per ADR from $0.51 a year earlier. The drop was mainly due to lower profits at its TV division, where intense price competition and rising raw material costs have squeezed profit margins. Lower results from its cellphone and movie operations also contributed to the weaker earnings. However, overall sales improved 16.2%, to $18.7 billion from $16.1 billion. If you disregard foreign currency changes, sales were unchanged. The slowing U.S. economy and weak dollar could hurt Sony’s growth in fiscal 2009. But recent cost cuts should improve its long-term profitability. As well, rising sales of its PlayStation 3 video game player should lead to more licensing revenue from game designers. Sony is a buy for long-term gains....