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
TENNANT CO. $37 (New York symbol TNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 18.6 million; Market cap: $688.2 million; WSSF Rating: Average) has agreed to pay $68 million for UK-based Applied Sweepers, which makes street sweeping and cleaning equipment under the Green Machine brand. Tennant has also agreed to pay an undisclosed sum for Sociedade Alfa Ltda., a Brazilian maker of commercial cleaning machines. These businesses have combined annual sales of about $49 million. To put the purchases in context, Tennant earned $39.9 million in 2007, up 33.9% from $29.8 million in 2006. Earnings per share rose 32.5%, to $2.08 from $1.57. If you disregard a gain on the sale of a facility and other non-recurring items, per-share earnings rose 16.2%. Sales grew 10.9%, to $664.2 million from $599.0 million. Tennant is a buy.
Rising costs for ingredients such as wheat, corn and meat have squeezed profit margins at most food processing companies. Higher packaging and transportation costs are also hurting earnings. We feel investors should now more than ever focus on leading food companies, such as these six. Their strong brands and high market share make it easier for them to pass along higher costs. They are also selling off weaker brands and expanding internationally, which improves their long-term prospects. KRAFT FOODS INC. $32 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $51.2 billion; WSSF Rating: Above average) is the world’s second-largest food company after Swissbased Nestle. Leading brands include Kraft (cheese), Maxwell House (coffee), Nabisco (biscuits and cookies) and Oscar Meyer (meats)....
NEWELL RUBBERMAID INC. $24 (New York symbol NWL; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 279.3 million; Market cap: $6.7 billion; WSSF Rating: Average) has acquired Japan’s Aprica Kassai Inc. for an undisclosed amount. Aprica makes strollers, car seats and other children’s products. The purchase gives Newell a premium brand with a leading position in Japan. The 60-year-old brand has a strong international reputation for pediatric research and child safety. It also has proprietary technology in lightweight strollers and car seats. Newell plans to work with Aprica’s founding family to establish a new joint foundation for pediatric research that will remain in the family’s name. The Kassai family already operates a research organization focused on pediatrics and parenting. Some of this research shows up in Aprica’s product offerings. Other research is shared publicly....
Fears of slowing customer spending, spurred by lower consumer confidence in the wake of the housing market slowdown and higher fuel prices, have driven down the stocks of most retailers in the past year. The weaker U.S. dollar also makes imports more expensive. Department store operator J.C. Penney is down 43% from its all-time peak of $87 a year ago. However, new investments in cost-saving computerized inventory systems, store upgrades and private label brands should quickly expand the company’s profits and cash flow when consumer spending rebounds. At its current price, we feel Penney has great long-term appeal. J.C. PENNEY CO. INC. $50 (New York symbol JCP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 221.7 million; Market cap: $11.1 billion; WSSF Rating: Average) operates 1,067 department stores throughout the United States and Puerto Rico. About 40% of U.S. households have shopped at a JC Penney store in the past year....
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GOODYEAR TIRE & RUBBER CO. $26.76 (New York symbol GT; SI Rating: Extra Risk) (www.goodyear.com; 330-796-2121; Shares outstanding: 240.2 million; Market cap: $6.4 billion) plans to cut up to 500 jobs and reduce tire production at two of its plants in Amiens, France. The two plants employ about 2,700 people. Goodyear will outsource some tire production to lower-cost factories in Europe and elsewhere, and eliminate products. Goodyear continues to focus on the market for higher-profit replacement tires. However, with car and truck markets weakening, Goodyear’s growth in the cyclical tire business is still likely limited in the near future. Goodyear Tire & Rubber Co. is still a hold.
AMERIGO RESOURCES $2.54 (Toronto symbol ARG; SI Rating: Speculative) (604-681-2802; www.amerigoresources.com; Shares outstanding: 94.4 million; Market cap: $239.7 million) has a contract with Codelco, Chile’s state-owned copper producer, to process the tailings from El Teniente, the world’s largest underground copper mine. Tailings are the waste rock produced in the mining process. The contract runs at least through 2021. Amerigo has a further agreement with Codelco to process a supplementary source of material from the nearby Colihues tailings pond. Amerigo also holds 13.2% of TSX-listed Candente Resource Corp. with a market value of $16.6 million. Candente explores for copper, gold and silver in Peru and Mexico. In the three months ended September 30, 2007, Amerigo’s revenues rose 44.6%, to $28.5 million from $19.7 million. (All figures except share price in U.S. dollars.) Earnings fell 20.2%, to $6.6 million or $0.07 a share from $8.3 million or $0.09. Cash flow per share fell 16.7%, to $0.09 a share from $0.10. Earnings and cash flow fell because of higher Chilean power costs. The stock now trades at 7.1 times cash flow....
FIRSTSERVICE CORP. $21.07 (Toronto symbol FSV; SI Rating: Extra Risk) (416-960- 9500; www.firstservice.com; Shares outstanding: 28.6 million; Market cap: $602.2 million) operates in the expanding service sector, providing services in commercial real estate, residential property management, integrated security services, and property improvement services. FirstService’s revenues rose 34% in the three months ended December 31, to $502.2 million from $374.8 million. Excluding onetime items, earnings per share rose 31.8%, to $0.29 from $0.22. Cash flow per share rose 35.3%, to $0.92 from $0.68. FirstService now trades at 5.7 times cash flow. Since November 2007, the stock has dropped from $36 to its current price along with falling markets, plus investor concerns that the U.S. subprime crisis would hurt FirstService’s revenues. However, increased foreclosures would likely boost demand for its property management services from banks and other creditors....
OILEXCO INC. $15.90 (Toronto symbol OIL; SI Rating: Speculative) (403-262-5441; www.oilexco.com; Shares outstanding: 219.8 million; Market cap: $3.5 billion) jumped recently after it struck a new oil bearing zone at its 40%-held Huntington field in Britain’s central North Sea....
IVERNIA INC. $1.73 (Toronto symbol IVW; SI Rating: Speculative)(416-867-9298; www.ivernia.com; Shares outstanding: 146.9 million; Market cap: $254.2 million) has received approval from the Western Australia state government to export lead concentrate through the Port of Fremantle, 1,250 kilometers from its mine. Ivernia will have to ship the concentrate in sealed containers, post a $4.4 million bond and have shipments inspected by an independent auditor. Ivernia suspended production at its Magellan lead mine in Western Australia in April 2007, after the Port of Esperance blocked shipments due to bird fatalities from lead poisoning. Esperance is 700 kilometers from Ivernia’s mine. The company said it would take four months to clear 19,000 tons of lead stockpiled at Magellan and 9,000 tons stored at Esperance. After production resumes at Magellan, Ivernia aims to ship 150,000 metric tons of lead concentrate from Fremantle each year to customers in China. Lead is currently trading for about $2,600 a ton, up from $1,700 a ton a year ago....