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
BROADRIDGE FINANCIAL SOLUTIONS INC. $22 (New York symbol BR) specializes in three areas of service to the investment industry: investor communications; securities processing; and transaction clearing, trade settlements and other back office operations. Broadridge’s systems help both large and small clients cut their costs while it profits from the continuing fall in the costs of computing. We’re adding it to our Aggressive Growth Portfolio. Best Buy. CINTAS CORP. $32 (New York symbol CTAS) has paid a dividend each year since it became a public company in 1983. The new annual rate of $0.46 a share, up 17.9% from $0.39, yields 1.4%. Buy. GAMESTOP INC. $52 (New York symbol GME) reported a 20% increase in same-store sales for the nine-week period ended January 5, 2008, thanks mainly to lower video game console prices. However, GameStop faces strong competition from discount retailers and online services that let users download games. Sell.
ABB LTD. ADRs, $24 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $55.2 billion; WSSF Rating: Above average) is a major Swiss-based provider of power technologies for utilities. These include transformers, transmission systems and other power industry apparatus such as voltage switch gears and circuit breakers. ABB also makes automation systems and robotics that help increase plant productivity in a wide variety of industries. Europe is ABB’s largest market. It accounts for about 46% of revenues, followed by Asia (26%), the Americas (18%) and Other (10%).
Long history of success
ABB took its present form in 1988 through the merger of Sweden’s Asea AB and Switzerland’s BBC Brown Boveri AG. Asea (formed in 1883) introduced electricity into Sweden, and developed its railway network. Brown Boveri (formed in 1891) specialized in power generation and turbines....
Many members of my Inner Circle have asked the same question this week: Is it time to buy? If I had to choose between “Buy” and “Sell”, I’d say “Buy”, by a big margin. Having said that, I’m obliged to repeat a caveat you’ve often heard from me over the years: Nobody can predict these things consistently. If you could do that, you’d eventually acquire a measurable proportion of all the money in the world, and nobody ever does that....
FAIR ISAAC CORP. $22 (New York symbol FIC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 49.3 million; Market cap: $1.1 billion; WSSF Rating: Average) earned $0.39 a share in its first fiscal quarter ended December 31, 2007, down 25.0% from $0.52 a year earlier. Revenue fell 4.2%, to $199.4 million from $208.2 million. 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. Fair Isaac is a buy....
APPLE INC. $139 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 875.5 million; Market cap: $121.7 billion; WSSF Rating: Average) now lets customers rent movies through its iTunes store. The company hopes this will fuel sales of its computers and videocapable iPods. It should also spur interest in its Apple TV device, which can now download files directly from iTunes without a computer. Apple has sold over 4 billion songs since it launched its iTunes online download store in 2003. Besides music, iTunes also sells full-length movies, TV shows and games. The popularity of iTunes should give Apple an edge over other movie download services. The stock is now reasonably priced in relation to its prospects....
ANHEUSER-BUSCH COMPANIES INC. $49 (New York symbol BUD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 733.8 million; Market cap: $36.0 billion; WSSF Rating: Above average) is the world’s largest brewer, and accounts for 50% of the U.S. beer market. Beer provides 85% of Anheuser-Busch’s earnings. The remaining 15% comes from its nine theme parks and aluminum can recycling operations. While demand for Anheuser-Busch’s core brands has weakened, the company is doing a good job expanding sales to drinkers between 21 and 27 years old. These drinkers tend to consume more beer than other age groups. Acquisitions and a new alliance with a leading European brewer have also let Anheuser-Busch profit from rising interest in premium imports and craft beers. These products generate higher profits than regular beers . In the three months ended September 30, 2007, earnings grew 10.8%, to $706.7 million from $637.5 million a year earlier. Earnings per share rose 15.9%, to $0.95 from $0.82, due to fewer shares outstanding. Sales climbed 7.0%, to $4.6 billion from $4.3 billion....
AT&T INC. $37 (New York symbol T; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 6.1 billion; Market cap: $225.7 billion; WSSF Rating: Average) fell 5% in early January as it looks like the slump in the housing markets has forced the company to cut off service to some subscribers who could not pay their bills. Fears of slowing consumer demand for AT&T’s Internet and TV services also put pressure on the stock. However, AT&T’s traditional telephone and Internet businesses account for just 20% of its revenue. Demand for AT&T’s wireless services should remaining strong, particularly considering its exclusive deal to carry Apple’s iPhone. That should let it maintain its $1.60 dividend (4.3% yield). AT&T is a buy.
We feel investors should diversify their resource sector holdings with non-oil stocks such as gold miner Newmont and forest products producer Weyerhaeuser. Both are leaders in their respective fields, and their large size makes it easier for them to endure commodity price swings NEWMONT MINING CORP. $51 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 434.7 million; Market cap: $22.2 billion; WSSF Rating: Average) is one of the world’s largest producers of gold. It also mines copper, silver and zinc. Newmont aims to increase its exposure to gold. Its Canadian subsidiary Franco-Nevada Corp. recently sold shares to the public, and used the proceeds to pay Newmont $1.3 billion in cash for certain mining and oil and gas royalty assets....
WELLS FARGO & CO. $29 (New York symbol WFC; Conservative Growth Portfolio; Finance sector; Shares outstanding: 3.3 billion; Market cap: $95.7 billion; WSSF Rating: Average) earned $2.38 a share in 2007, down 3.6% from $2.47 in 2006. If you disregard writedowns of mortgage loans and other one-time items, per-share earnings in 2007 grew 8.9% to $2.69. Revenue rose 10.4%, to a record $39.4 billion from $35.7 billion, thanks to strong growth in deposits, loans and fee income. Bad loans rose to 0.70% of total loans in 2007 from 0.52% in 2006. Wells Fargo’s conservative lending policies have helped it avoid the big writedowns that many large financial institutions have incurred. The company’s growing retail banking and wealth management operations should help offset a slowing housing market in 2008. It may also take advantage of the current situation to expand its presence outside of its core markets in the Western United States. Wells Fargo is a buy.
Oil prices recently climbed to over $100 a barrel, but have moved down along with market indexes due to fears of a recession. We feel it’s a good idea to focus on well-established oil and gas stocks that can withstand the inevitable price setbacks, and prosper anew when prices rebound. Here is our analysis of three of our long-term favorites. However, only two are buys at current prices. We also analyze two of our favorite non-oil resource stocks on Page 15. CHEVRON CORP. $81 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.1 billion; Market cap: $170.1 billion; WSSF Rating: Above average) is the second-largest oil company in the United States after ExxonMobil Corp. Internationally, it has operations in over 175 countries....