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
NORTHBRIDGE FINANCIAL CORP. $35.75 (Toronto symbol NB; SI Rating: Speculative) (416-366- 9544; no web site; Shares outstanding: 49.7 million; Market cap: $1.7 billion) is one of the largest commercial property and casualty insurers in Canada. This includes commercial businesses, homes and vehicles. Around 88% of Northbridge’s business is with commercial clients and 12% is in personal lines. Commercial lines are the most profitable part of the insurance business and are Northbridge’s main focus. In the three months ended March 31, 2008, Northbridge’s earnings rose 134.4%, to $105.5 million or $2.13 a share, from $45 million or $0.89 a share. One-time investment gains pushed up earnings in the latest quarter. Revenues rose 33.7%, to $440.3 million from $329.3 million. Despite the improved results, Northbridge’s combined ratio, or claims paid out divided by premiums taken in (the lower the better), moved up to 98.9% from 93.5%. This deterioration came mostly from intense pricing competition in commercial lines....
We avoid most new stock issues for a very simple reason: Human nature dictates that new issues will generally come to market when it’s a good time for insiders or the company to sell. That needn’t be, and often isn’t, a good time for you to be buying. If, while you were investing in the stock market, you bought every new issue that came out, you’d wind up with mediocre long-term results, at best. However, you won’t be able to buy all new issues. That’s because some new issues are underpriced when they come to the market, so they attract a lot of buyers and shoot up as soon as trading begins. When investing in the stock market, brokers can spot these “hot” new issues ahead of time, if only because of the reaction they get from their first tentative selling efforts. Hot new issues are always in short supply, so brokers reserve them for their most profitable clients....
AMAZON.COM $82.52 (Nasdaq symbol AMZN; SI Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 417.7 million; Market cap: $34.5 billion) is the leading bookseller on the Internet (it offers 4.7 million titles), as well as a leading video and music seller. It also has numerous other store categories, including electronics, computer games, toys and tools. Through Amazon Services, the company also offers programs that let sellers market on its web sites. In the three months ended March 31, 2008, Amazon’s revenues rose 37.1%, to $4.1 billion from $3 billion. International sales comprised 48.6% of revenues and rose 44.2%, helped by stronger foreign currencies against the U.S. dollar. North American sales made up 51.4% of the total, and rose 31.1%. Earnings rose 28.8%, to $143 million or $0.34 a share, from $111 million or $0.27. Amazon holds cash of $2.2 billion or $5.16 a share....
SUNOPTA INC., $5.22, symbol SOY on Toronto, fell 20% today after the company said it is replacing its chief executive officer and chief financial officer following an ongoing audit investigation into a large writedown in its berry business. SunOpta gets the bulk of its revenues from its Foods division, which specializes in the sourcing, processing and distribution of organic, kosher and specialty food products. The company’s BioProcess division engineers and sells proprietary steam explosion technology systems that aim to use high heat and pressure to convert biomass such as sugar cane pulp, wood chips and straw into useful components such as ethanol. These waste products are much cheaper and more plentiful than the corn or fresh sugar cane typically used to produce ethanol. However, the development of this process has not unfolded as well as we expected....
AMERICAN EXPRESS CO. $38.04, New York symbol AXP, has settled its anti-trust lawsuit with MasterCard Inc. Amex had accused MasterCard of illegally blocking U.S. banks from issuing American Express credit cards. MasterCard has now agreed to pay Amex $1.8 billion in quarterly installments over the next three years. Combined with its November, 2007 settlement with Visa Inc., Amex will now receive $880 million a year for the next three years. In 2007, Amex earned $3.9 billion or $3.29 a share. Weaker retail spending has hurt revenue growth at Amex’s credit card business. However, credit card use continues to expand internationally. As well, the Visa and MasterCard settlements will help Amex offset rising loan losses....
Watch Pat McKeough’s June 20 interview on the Business News Network “Market Call” program with Michael Hainsworth. Click on: http://watch.bnn.ca/market-call/june-2008/market-call-june-20-2008/#clip61441 to see the interview. Or, go to www.bnn.ca and you’ll find the link on the lower right side of the page....
Watch Pat McKeough’s June 20 interview on the Business News Network “Market Call” program with Michael Hainsworth. Click on: http://watch.bnn.ca/market-call/june-2008/market-call-june-20-2008/#clip61441 to see the interview. Or, go to www.bnn.ca and you’ll find the link on the lower right side of the page....
MAJOR DRILLING, $53.25, symbol MDI on Toronto, reports that revenues rose 34.1% in the three months ended April 30, 2008, to $170 million from $129 million. Excluding one-time items, earnings rose 42.1%, to $25.3 million from $17.8 million. Earnings per share rose 39%, to $1.07 from $0.77 on more shares outstanding. Cash flow per share rose 38%, to $1.49 from $1.08. In the latest quarter, strong demand for drilling rigs, especially for gold projects, boosted revenues and earnings. About half of Major’s revenues come from gold drilling. South and Central American revenues rose 47%, to $60.4 million from $41.1 million, despite a slowdown in Ecuador and Venezuela late in the quarter. The strong Canadian dollar and labour shortages held back Major’s revenues and earnings, but the company was able to raise prices due to strong demand for its services. High prices of nickel, copper, gold, silver and other metals will continue to spur exploration activity. However, Major Drilling’s exposure to continued high resource sector activity adds risk. Its operations in Ecuador and Venezuela add political risk....
ANHEUSER-BUSCH COMPANIES INC. $61.12, New York symbol BUD, is now the target of a $65.00-a-share hostile takeover offer from InBev NV, a Belgian-based brewer. InBev has little presence right now in the United States, but buying Anheuser-Busch would give it about half of the U.S. beer market. The stock is trading for roughly $4 below the bid, which indicates investors feel a competing offer is unlikely. As well, the recent problems in the credit markets could make it difficult for InBev to pay more, or for another company to launch a rival bid. Anheuser-Busch is now a hold....
TUCOWS INC., $0.70, symbol TC on Toronto, provides domain name registrations and other services to over 9,000 Web-hosting companies and Internet service providers. It provides registration for such top domains as .com, .net, and .org, as well as 17 country-code domains, including .ca, .us and .uk. Tucow is selling certain customer accounts that it shared with Florida-based Hostopia, symbol H on Toronto, to Hostopia for $1.6 million U.S. Approximately 14,000 Domain Direct, NetIdentity and ItsYourDomain.com customer accounts will move to Hostopia’s web service by July, 2008. Tucows still holds a domain name portfolio of about 136,000 domain names. Tucows’ August, 2007 price reductions for domain registrations and the strong Canadian dollar have hurt earnings and cash flow. However, the new pricing structure should improve its long-term growth prospects....