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.
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Growth Stocks Library Archives
MCDONALD’S CORP. $53 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.2 billion; Market cap: $63.6 billion; WSSF Rating: Above average) plans to spend $2.0 billion on capital upgrades in 2008, up slightly from $1.9 billion in 2007. About half of this will go to open 1,000 new restaurants, including 125 in China and 40 in Russia. McDonald’s currently operates 31,000 outlets worldwide. The company also plans to remodel 1,600 of its existing restaurants. Another area of growth for McDonald’s is premium coffee. It plans to install coffee bars at its 14,000 locations in the United States. Demand for these beverages is growing fast. McDonald’s aims to lure customers away from Starbucks and other high-end coffee shops with lower prices and other promotions....
Computer technology stocks are among the most volatile in the Manufacturing & Industry sector of the economy, as we’ve seen with the current market turmoil. We think that the best way to invest in technology is through large, established, broad-based technology companies capable of funding expensive research and bringing new products to market. A great example is IBM. Its wide exposure to hardware and software limits its reliance on any single product. Its focus on computer services also gives it steadier revenue streams than most computer companies....
20-20 TECHNOLOGIES INC. $6.15 (Toronto symbol TWT; SI Rating: Speculative) (514-332-4112; www.2020technologies.com; Shares outstanding: 18.8 million; Market cap: $115.9 million) is a leading maker of computer- aided design, sales, engineering and manufacturing software for the interior design and furniture industries. The Montreal-based company serves clients in 100 countries and markets software in 23 languages. In the three months ended July 31, 2007, revenues rose 14%, to $16.9 million from $14.9 million a year earlier. (All figures except share price in U.S. dollars.) Earnings fell 18.9%, to $549,000 or $0.03 a share, from $677,000 or $0.04 a share. Cash flow per share rose 6.5% in the latest quarter, to $2.7 million or $0.14 a share, from $2.5 million or $0.13 a share. That means the stock now trades for a low 11.0 times cash flow. 20-20 Technologies also holds a high cash balance of $39.1 million or $2.08 a share. The company spends a high 14% of sales on research to stay ahead of the competition....
DIAMONDS NORTH RESOURCES $1.47 (Toronto symbol DDN; SI Rating: Start-up) (1-866-802-2010; www.diamondsnorthresources.com; Shares outstanding: 59.0 million; Market cap: $86.7 million) jumped as high as $2.05 recently, after it reported high diamond counts from the Tuktu 1 kimberlite on its 100%-owned Amaruk property in the Pelly Bay Diamond District of Nunavut. A total of 550 diamonds were recovered from an 81.75-kilogram drill-hole sample. Tuktu-1 yielded nearly seven diamonds per kilogram of kimberlite. That’s comparable to the initial results from the top diamondproducing mines in Canada. Here’s a case where we would recommend applying our sell-half rule. That’s when you sell half of a speculative stock such as Diamonds North that doubles in price for you, so you can get back your initial outlay....
PRT FOREST REGENERATION INCOME FUND $6.54 (Toronto symbol PRT.UN; SI Rating: Speculative) (250-381-1404; www.prtgroup.com; Shares outstanding: 9.6 million; Market cap: $62.8 million) has cut its monthly distribution by 34.2% to $0.046 from $0.07. The units now yield 8.4%. The weaker U.S. housing market and the higher Canadian dollar has hurt Canadian forest products firms. That in turn has cut demand for the company’s seedlings. PRT Forest is a hold....
FAIR ISAAC CORPORATION $23.69 (New York symbol FIC; SI Rating: Average) (415- 472-2211; www.fairisaac.com; Shares outstanding: 49.3 million; Market cap: $1.2 billion) has cut its profit forecast for 2008 to $1.80 to $1.90 a share, from $2 a share previously. Fair Isaac’s main business is its FICO software, which lets creditors use information about a customer to calculate a credit score. The company’s sales growth could slow along with weaker U.S. housing markets. The U.S. 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....
CIMAREX ENERGY $41.40 (New York symbol XEC; SI Rating: Extra risk) (303-295-3995; www.cimarex.com; Shares outstanding: 82.5 million; Market cap: $3.4 billion) is an oil and gas explorer and producer primarily focused in western Oklahoma, Kansas, the upper Gulf Coast areas of Texas and South Louisiana, the Permian Basin area of West Texas, plus the Gulf of Mexico. Cimarex’s production averaged 448.5 million cubic feet equivalent per day in the latest quarter. Natural gas makes up 73% of production. The company expects production for the full year 2007 to average 450 million cubic feet per day. In the three months ended September 30, 2007, 2007, Cimarex’s cash flow was $235.3 million or $2.88 a share, down 2.7% from $241.7 million or $2.95 a share a year earlier....
TRUE ENERGY TRUST $3.51 (Toronto symbol TUI.UN; SI Rating: Speculative) (403- 264-8875; www.tketrust.com; Units outstanding: 79.6 million; Market cap: $279.2 million) is taking measures to cut debt, increase capital spending and lower its cash flow paid as distributions to a more sustainable level. The company plans to sell its oil and gas assets in Saskatchewan and re-focus its operations in Alberta. The Saskatchewan assets represent 40% of the company’s total daily production of 14,096 barrels. True plans to use the proceeds to pay off its $159.2 million bank debt and increase its 2008 capital spending to $60 million from $40 million....
Gold hit a record high of $850 an ounce in 1980, then worked its way downward for 25 years. It began rising again in 2002, and it has now broken past $850 and moved higher. It’s now trading at $882. We’re not convinced that gold prices will move significantly higher, or even hold the recent gains. However, some of the conditions that typically accompany higher gold prices are present. U.S. economic growth has slowed and stock markets have dropped. That’s pushing interest rates down. Those lower rates. plus high energy prices, could push inflation up. Either way, we still think the best way to participate in the gold market is through companies with sound production, positive cash flow and strong prospects, like the four we analyze below....
LIQUIDATION WORLD $2.81(Toronto symbol LQW; SI Rating: Speculative) (1-877- 728-3289; www.liquidationworld.com; Shares outstanding: 8.2 million; Market cap: $23.2 million) lost $3 million or $1.42 a share in the twelve months ended October 7, 2007, compared to a gain of $852,000 or $0.18 a share a year earlier. Sales rose 1.8%, to $212 million from $205.2 million. Profits were hurt by the $1.1 million cost of closing its Calgary head office and relocating to Brantford, Ontario. The company also realized $3.2 million in losses from the closure of 15 out of 18 of its U.S. retail stores and the winding down of its U.S. operations. The closing of the stores in the U.S. will cut the company’s losses....