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
Department stores have fallen out of favor in the past few years, largely due to the growing popularity of smaller specialty stores and online shopping. However, their wider range of merchandise helps shield them from fickle fashion trends and fads. Their larger size also makes it easier for them to negotiate better deals with suppliers. Discount department stores like Wal-Mart have moved up lately, as the slowing economy helps them attract cost-conscious shoppers. While traditional department stores such Macy’s, J.C. Penney and Nordstrom have struggled, they continue to do a good job controlling costs. That will help them thrive as the economy rebounds. WAL-MART STORES INC. $57 (New York symbol WMT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 4.0 billion; Market cap: $228.0 billion; WSSF Rating: Above average) is the world’s largest retailer, with over 7,200 stores. About 55% of its stores are in the United States....
Hewlett-Packard fell recently after it announced that it would buy Electronic Data Systems. Investors worry that the high price and integration costs will weigh on Hewlett’s earnings growth, particularly after it just completed a multi-year restructuring following its May 2002 purchase of Compaq Computer. However, we feel EDS will help Hewlett diversify its revenues and cut its long-term risk. HEWLETT-PACKARD CO. $47 (New York symbol HPQ; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 2.5 billion; Market cap: $117.5 billion; WSSF Rating: Above average) is one of the world’s leading makers of computers and electronic devices. Products include printers and digital cameras (27% of 2007 revenue, 41% of profits); personal computers (34%, 18%); business computers (18%, 19%); computer services (16%, 17%); financing, software and other (4%, 4%)....
Many investors look on the soaring price of oil as a major negative for the market and economy. Certainly it hurts some companies and industries. But it may turn out to be a plus of sorts for a number of stocks we recommend, and not just our oil selections. That’s because many oil-producing countries are gathering up a growing portion of their newly ballooned oil income into so-called “Sovereign Wealth Funds”, or SWFs for short. The aim of these funds is to build up and invest the profits from oil, as a reserve for the day when the oil runs out. Non-producers such as China and India are also building up vast sums. Estimates of total SWF assets now run to $3 trillion, and that number could triple in five years....
PRT FOREST REGENERATION INCOME FUND $4.05 (Toronto symbol PRT.UN; SI Rating: Speculative) (250-381-1404; www.prtgroup.com; Shares outstanding: 9.6 million; Market cap: $38.9 million) is the largest producer of container-grown forest seedlings in North America. The company operates 15 nurseries, in B.C., Alberta, Saskatchewan and Ontario in Canada, and in Oregon in the United States. It grows seedlings in environmentally controlled greenhouses and open outdoor compounds. PRT reported 22.2% lower revenues in the three months ended March 31, 2008, to $9.1 million from $11.7 million. Earnings per unit fell sharply, to $0.03 from $0.15. Cash flow per unit fell 46.4%, to $0.15 from $0.28. The fund now pays a $0.02 monthly distribution, which currently yields 5.9%....
TEMPUR-PEDIC $10.93 (New York symbol TPX; SI Rating: Speculative)(800-878-8889; www.tempurpedic.com; Shares outstanding: 74.7 million; Market cap: $816.3 million) reports that in the three months ended March 31, 2008, earnings fell 54.6%, to $13.5 million from $29.8 million a year earlier. Earnings per share fell 48.9%, to $0.18 from $0.35 on fewer shares outstanding. Sales fell 7.1%, to $247.2 million from $266 million. In the latest quarter, international sales rose 10% due to the declining U.S. dollar, but domestic sales fell 16% as the U.S. economy continued to slow. Higher costs also hurt profitability. Approximately 75% of mattress sales are replacements, so buyers can postpone their...
RDM CORPORATION $1.39 (Toronto symbol RC; SI Rating: Speculative) (519-746-8483; www.rdmcorp.com; Shares outstanding: 21.5 million; Market cap: $28.8 million) provides software and hardware products for electronic payment processing, mainly in the United States. RDM’s Image & Transaction Management System lets banks scan all types of checks, and then route them to any location for immediate electronic processing. RDM is introducing a new product for small businesses. Called “Simply Deposit”, the new system lets small businesses deposit checks electronically. This eliminates the need to physically go to the bank. The new small business product broadens RDM’s customer base beyond banks and financial institutions. In the short term, RDM faces difficulties from a low U.S. dollar and possible U.S. bank spending cutbacks brought on by subprime mortgage problems....
BAYOU BEND $0.64 (Toronto symbol BBP; SI Rating: Speculative) (416-364-8820; www.bayoubendpetroleum.com; Shares outstanding: 308.8 million; Market cap: $197.6 million) jumped recently after it announced a new natural gas discovery at its Marsh Island Eagle’s Nest project in Louisiana. Bayou has signed a joint exploration agreement with the Contango Group to contribute acreage and jointly drill Eagle’s Nest prospect. Bayou will retain a 12.5% stake in the project. The Marsh Island area is mostly unexplored, but it’s near recent large gas discoveries. Bayou will spend $47 million U.S. on drilling up to 12 exploration wells in 2008. Bayou Bend is a buy for aggressive investors.
AASTRA TECHNOLOGIES $25.82 (Toronto symbol AAH; SI Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 16.0 million; Market cap: $413.7 million) develops and markets products and systems for accessing communication networks, including the Internet. In the three months ended March 31, 2008, Aastra’s revenues fell 8.6%, to $140 million from $153.3 million. Earnings per share excluding one-time items fell 36.5%, to $0.33 from $0.52. Lower European sales and the strong Canadian dollar hurt revenues and earnings. Higher expenses and continued weakness in the U.S. market also hurt profits. Aastra holds cash and marketable securities of $153.8 million, or $9.61 a share. Aastra continues to expand successfully by acquiring money-losing product lines in which distressed sellers have invested large sums in research and market development. The acquisitions add risk, but the company has a good track record in integrating new businesses....
BROADRIDGE FINANCIAL SOLUTIONS $22.29 (New York symbol BR: SI Rating: Extra risk) (201-714 3000; www.broadridge.com; Shares outstanding: 140.1 million; Market cap: $3.1 billion) continues to rise in price after reporting earnings per share excluding one-time items of $0.26 in the quarter ended March 31. Although that was down 13.3% from $0.30 a share a year earlier, it beat consensus expectations of $0.24 a share. The company also raised its 2008 earnings per share guidance, excluding one-time items, to $1.35 to $1.45, from $1.30 to $1.40. The stock now trades at 15.9 times the midpoint of the new forecast....
COMPUTER MODELLING GROUP $18.25 (Toronto symbol CMG; SI Rating: Speculative) (403- 531-1300; www.cmgl.ca; Shares outstanding: 8.4 million; Market cap: $153.3 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 250 clients worldwide in 45 countries. Computer Modelling’s revenues in the three months ended December 31, 2007 rose 27.1%, to $7.3 million from $5.8 million. Earnings per share rose 13.6%, to $0.25 from $0.22. The company reported the improved results despite higher expenses related to increased staff put in place earlier to prepare for future growth. Costs to develop a new version of its reservoir stimulation software also hurt profits. Computer Modelling spent $1.7 million, or a high 23% of revenues on research and development in the latest quarter....