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
FORD MOTOR CO. $8.27, New York symbol F, gained 10% this week after billionaire investor Kirk Kerkorian offered to buy up to 20 million common shares (1% of the total outstanding) at $8.50 a share. If successful, Kerkorian would own roughly 5.7% of Ford. The Ford family still controls about 40% of the company through special class B shares, so a full takeover seems unlikely. However, Kerkorian’s involvement is a plus, as it should put pressure on the company to continue to improve results. Meanwhile, Ford is starting to see some of the benefits of its latest restructuring. In the first quarter of 2008, the company earned $0.20 a share before unusual items, compared with a loss of $0.09 a year earlier. Revenue fell 8.4%, to $39.4 billion from $43.0 billion. If you exclude the recent sale of the Rover and Jaguar divisions, revenue would have grown slightly....
IAMGOLD CORP., $5.93, symbol IMG on Toronto, fell more than 15% this week, after Ecuador’s President Correa suspended all medium and large-scale mining exploration projects for 180 days until a new mining law is approved. Correa reiterated that he supports large mining projects, but insisted that mining companies will have to comply with stricter controls and share more of their future profits with the state. As well, most gold stocks closed down for the week. IAMGold stated that an exploration freeze could delay a feasibility study of its Quimsacocha gold project in southern Ecuador. The deposit holds an estimated 3.3 million ounces of gold. Quimsacocha was scheduled to start production in 2012. Leftist ex-finance minister Rafael Correa won the national election in Ecuador in November 2006, becoming the country’s eighth president since 1996. President Correa is an ally of Venezuelan president Hugo Chavez....
BANK OF AMERICA CORP. $38.30, New York symbol BAC, earned $1.2 billion in the three months ended March 31, 2008, down 77.4% from $5.3 billion a year earlier. Earnings per share fell 80.2%, to $0.23 from $1.16. Most of the drop was due to a $4.8 billion increase in its loan loss provisions to cover potential future losses in its home equity, small business and homebuilder portfolios. It also wrote down $1.9 billion worth of securities. Revenue fell 6.6%, to $17.0 billion from $18.2 billion. The company’s retail banking and wealth management operations are still doing a good job attracting new clients, thanks partly to recent acquisitions. That should help Bank of America maintain its $2.56 dividend, which yields 6.7%. However, its pending takeover of troubled mortgage lender Countrywide Financial Corp. adds to its short-term risk. Bank of America is a hold....
BROADRIDGE FINANCIAL SOLUTIONS INC. $17.94, New York symbol BR, has outlined details of a recent transaction by its clearing services subsidiary, Ridge Clearing & Outsourcing, in response to last week’s downgrade of its credit rating by Standard & Poor’s. In late 2007, Ridge Clearing accepted $380 million worth of securities as collateral. That transaction increased Broadridge’s short-term debt to just $426 million, which is equal to only 17% of its current market cap of $2.5 billion. The transaction involved 143 pools of AAA-rated mortgage-backed bonds issued by the Federal National Mortgage Association. The company states “there were no exotic or illiquid mortgage-backed derivative securities in this transaction”. As well, the party who had committed to purchase these bonds is a global financial services company rated A+ by Standard & Poor’s. This party completed the transaction on January 17, 2008, and Broadridge repaid the related short-term loan....
BROADRIDGE FINANCIAL SOLUTIONS INC. $17.94, New York symbol BR, has outlined details of a recent transaction by its clearing services subsidiary, Ridge Clearing & Outsourcing, in response to last week’s downgrade of its credit rating by Standard & Poor’s. In late 2007, Ridge Clearing accepted $380 million worth of securities as collateral. That transaction increased Broadridge’s short-term debt to just $426 million, which is equal to only 17% of its current market cap of $2.5 billion. The transaction involved 143 pools of AAA-rated mortgage-backed bonds issued by the Federal National Mortgage Association. The company states “there were no exotic or illiquid mortgage-backed derivative securities in this transaction”. As well, the party who had committed to purchase these bonds is a global financial services company rated A+ by Standard & Poor’s. This party completed the transaction on January 17, 2008, and Broadridge repaid the related short-term loan....
BROADRIDGE FINANCIAL SOLUTIONS, $16.76, symbol BR on New York, fell more than 7% this week after Standard & Poor’s lowered its credit rating on certain of the company’s obligations. S&P is concerned that Broadridge is taking on too much risk, especially at its Ridge Clearing subsidiary, given today’s difficult financial environment in the U.S. Broadridge 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 continues to win new clients. For example, RBC Wealth Management has just adopted Broadridge’s Brokerage Processing Services platform. LBBW Securities, a broker-dealer servicing German institutional clients investing in the U.S., is outsourcing its trade processing to Broadridge....
WASHINGTON MUTUAL INC. $10.95, New York symbol WM, has obtained $7 billion of new capital from a group led by TPG Capital, a private equity fund. That’s equal to 70% of Washington Mutual’s current market cap of $10 billion. TPG will receive a combination of new common shares and convertible preferred shares that could nearly double the number of shares outstanding. The deal requires stockholder approval. Meanwhile, due to rising mortgage defaults and writedowns, Washington Mutual estimates it lost $1.1 billion or $1.40 a share in the three months ended March 31, 2008. To cut its exposure to the volatile real estate market, Washington Mutual will stop accepting new mortgages from brokers, and close all of its freestanding home loan offices. The company has also cut its quarterly dividend, from $0.15 a share to $0.01. It now yields just 0.4%. The dividend cut should save Washington Mutual $490 million a year....
FAIR ISAAC CORP. $24.38, symbol FIC on New York, rose this week after it announced a number of restructuring measures. The company’s main business is its FICO software, which lets creditors use information about a customer to calculate a credit score. Fair Isaac will sell more than a dozen non-strategic businesses. These include its government research, advertising and veterinary diagnostics businesses, as well as some of its telecommunications applications. It has already sold its insurance-bill review business to Mitchell International. The company will also cut 420 jobs (out of 2,824 employees) and consolidate facilities. In total, Fair Isaac aims to reduce annual costs by about $100 million through the restructuring....
FAIR ISAAC CORP. $24.38, New York symbol FIC, has as its main business its FICO software, which lets creditors use information about a customer to calculate a credit score. The subprime mortgage crisis has hurt the banks and other financial institutions that are Fair Isaac’s major customers. These customers may cut back on software spending in the near term. However, over the longer term, the subprime crisis will likely increase demand for Fair Isaac’s reliable credit-scoring software. The company now hopes a new restructuring plan will improve its profitability. It plans to sell several non-core operations, cut staff and consolidate facilities. These moves should cut its annual pre-tax expenses by $35 million. To put that in context, Fair Isaac earned $20.2 million or $0.39 a share in the three months ended December 31, 2007....
VERIZON COMMUNICATIONS INC. $36 (New York symbol VZ) will merge its local telephone operations in Maine, New Hampshire and Vermont with FairPoint Communications Inc. on March 31, 2008. Verizon stockholders will receive about 0.0188 shares of FairPoint common stock as a special dividend for each share of Verizon they hold. This is a tax-deferred distribution, so investors will only be liable for capital gains taxes on their new shares when they sell. Best Buy. INTEL CORP. $22 (NASDAQ symbol INTC) has raised its quarterly dividend twice in the past six months. The new annual rate of $0.56 yields 2.5%. Buy. ANHEUSER-BUSCH COMPANIES INC. $48 (New York symbol BUD) plans to build up to four amusement parks near Dubai in the United Arab Emirates. These are its first parks outside of the United States. The new parks will be part of the world’s largest man-made island, which will also include shopping districts, resort hotels and restaurants. The first phase should be ready by 2012. Buy.