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
Fears of a slowing economy have hurt most industrial stocks in the past few months. Rising prices for raw materials, labor and fuel have also slowed their profit growth. We aim to limit your risk in this sector by zeroing in on companies with strong brands, reputations and market share. These advantages will let them overcome the recent downturn, and maintain earnings and dividends until the economy improves. Here are three top examples. All are doing a good job controlling costs and diversifying their businesses. As well, their products help customers cut costs and improve product quality. All three are also attractive in relation to their earnings and sales....
WINDSTREAM CORP. $11 (New York symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 449.9 million; Market cap: $4.9 billion; WSSF Rating: Average) provides local telephone and other telecommunication services to over 3 million customers in 16 states. Most of its customers are in rural areas. In 2007, earnings per share fell 4.9%, to $0.98 from $1.03 in 2006. These figures exclude the recent sale of the company’s directory business, as well as unusual items. Revenue rose slightly, to $3.26 billion from $3.22 billion. Windstream is doing a good job hanging onto customers in the face of strong competition from cable and Internet-based phone services. The company is now bundling high-speed Internet and satellite TV services with its regular phone services. Special bundles are also helping it attract more small business customers. That should help it maintain its high $1.00 dividend (9.1% yield)....
BRIGGS & STRATTON CORP. $14 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 49.7 million; Market cap: $695.8 million; WSSF Rating: Above average) earned $0.75 a share in its third fiscal quarter ended March 31, 2008, up 25% from $0.60 a year earlier. The year-earlier figure excludes a $0.42 a share restructuring charge. However, sales rose just 1.1%, to $724.8 million from $717.0 million. Lower sales volumes of pressure washers and generators offset a 6% rise in lawnmower engine sales. Demand for the company’s products will likely remain soft until the housing market improves. Meanwhile, Briggs’ recent restructuring will help it stay profitable. It’s also shifting more of its production to low-cost countries. These moves should give the company enough cash to support its $0.88 dividend, which yields 6.3%....
GANNETT CO. INC. $26 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 229.6 million; Market cap: $6.0 billion; WSSF Rating: Above average) earned $0.84 a share in the three months ended March 31, 2008, down 4.5% from $0.88 a year earlier. If you exclude a gain on the sale of land, Gannett’s earnings in the latest quarter fell 12.5%. Revenue fell 5.6%, to $1.7 billion from $1.8 billion, as the weak housing market has hurt real estate-related advertising revenues at its newspapers in Florida, Arizona, California and Nevada. These operations account for 25% of Gannett’s U.S. ad revenue. Ad sales should pick up later this year, due to the Olympics and the presidential election. Gannett could also take advantage of the current slowdown to expand its print and Internet operations. Gannett is still a buy for long-term gains.
We have generally stayed out of drug stocks in this decade, and that’s a good thing for our subscribers. Drug stock enthusiasts focus on the rising demand they foresee from aging baby boomers, for newly developed drugs which are more effective than older ones. They overlook the drawbacks to investment in the drug industry, which concern us more. These drawbacks include high research and development costs, with no sure payoff; limited patent life; and competition from still newer drugs. Starting from high stock-price levels and laboring under these disadvantages, most drug stocks have been weak-to-miserable performers for years. Drug makers will one day offer enough value to tempt us back into investing in them. For now, we will stick with long-time favorite Beckman Coulter. It grows along with rising health concerns. But every new equipment sale it makes gives it a new customer for lab supplies....
Oil has shot up 40% since January 2008, from around $85 a barrel to nearly $120. However, many oil stocks have failed to rise along with it. For example, CHEVRON CORP. $94 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.1 billion; Market cap: $197.4 billion; WSSF Rating: Above average) has gained just 24% during the same time. In general, oil stocks have lagged because oil prices rise or fall in response to short-term changes in oil supply or demand, which can reverse overnight. Despite the recent gains, a slowing U.S. economy could spur a large drop in oil prices....
LEON’S FURNITURE $11.38 (Toronto symbol LNF; SI Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.8 million; Market cap: $805.5 million) has built new warehouse showrooms and renovated its existing stores to profit from the boom in residential construction over the last few years. But even if housing sales in Canada slow down significantly, the company will keep prospering because new homeowners tend to keep buying home furnishings in the first few years of ownership. Leon’s has built its chain of over 60 furniture outlets on its three main advantages: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; and superior after-sales service. Leon’s aggressively promotes its cross-Canada stores with TV, radio and print ads. Leon’s reported 3.2% higher sales in the three months ended December 31, 2007, to $185.9 million from $180.1 million earlier. Excluding one-time items, earnings per share rose 10.3%, to $0.32 from $0.29....
CROCS INC. $9.73, symbol CROX on Nasdaq, (Shares outstanding: 82.4 million; Market cap: $802.1 million) shows what can happen when a hot new issue goes cold. The company first sold stock to the public in February, 2006 at $10.50 a share (split-adjusted). It got as high as $75.21 in late October, 2007, but has moved down steadily ever since. Crocs designs and sells a range of footwear and other items that use its proprietary Croslite material. The company is best known for its brightly colored “Crocs” clogs....
Last month in this space, I said the 2007/2008 stock market decline may have ended, but you still need to stay alert for areas of above-average risk. I singled out recent new issues as likely to be miserable performers in the next few years. This past week we had a fine example. CROCS INC. $9.73, symbol CROX on Nasdaq, (Shares outstanding: 82.4 million; Market cap: $802.1 million) shows what can happen when a hot new issue goes cold. The company first sold stock to the public in February, 2006 at $10.50 a share (split-adjusted). It got as high as $75.21 in late October, 2007, but has moved down steadily ever since....
NISSAN MOTOR CO. $16.85 (Nasdaq symbol NSANY; SI Rating: Above-average) (310-771-3111; www.nissanmotors.com; Shares outstanding: 2.3 billion; Market cap: $38.1 billion) is Japan’s second largest automaker after Toyota, and just ahead of Honda. Nissan’s car models include Maxima and Sentra, and the more upscale Altima and Infiniti. Other models include Frontier pickups, the 350Z sports car, and the Xterra and Pathfinder SUVs. Major plants are in Japan, but also in the U.S., U.K., Mexico, Spain and Australia. In the fiscal third quarter ended December 31, 2007, Nissan’s revenues rose 18.2%, to 2.8 trillion yen ($26 billion U.S.) from 2.3 trillion yen ($21.9 billion) a year earlier. The revenue increase came from a 13% increase in vehicle sales to 898,000 units. Profits rose 26.6%, to 132.2 billion yen ($1.24 billion U.S., or $0.55 per ADR) from 104.5 billion yen ($979.7 million U.S. or $0.43 per ADR)....