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
AMEREN CORP. $54 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 208.0 million; Market cap: $11.2 billion; WSSF Rating: Average) provides electricity and natural gas to customers in Illinois and Missouri. The company has agreed to pay the State of Missouri $177.4 million to settle a lawsuit over the 2005 breach of a reservoir at Ameren’s Taum Sauk hydroelectric plant. To put that in context, Ameren earned $1.36 a share (total $282 million) before unusual items in the third quarter of 2007, down 10.5% from $1.52 a share ($312 million) a year earlier. Revenue rose 5.3%, to $2.0 billion from $1.9 billion. Ameren recently finalized a new four-year rate agreement in Illinois. The company will have to give back $150 million to its customers in the form of future credits. This will cut its per-share earnings by $0.26 in 2007, and $0.11 in 2008....
WAL-MART STORES INC. $48 (New York symbol WMT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 4.0 billion; Market cap: $192.0 billion; WSSF Rating: Above average) is beginning to enjoy the benefits of its current strategic plan, including renovating older stores and improving the electronic and clothing departments. The company is also building fewer new stores in the United States to reduce cannibalization of sales at current stores. In November 2007, overall sales rose 8.4% from a year earlier. Same-store sales grew 1.5%. Sales at Wal-Mart’s international stores rose 18.6% in November 2007. International operations now account for 25% of Wal-Mart’s total sales, up slightly from 24% a year earlier. The contribution of its overseas stores should continue to grow. Wal-Mart aims to expand its Chinese operations by 30% a year. The company’s recent acquisition of the minority interest in its Japanese subsidiary, plus a new joint venture in India, also enhance the outlook for its international division....
AT&T INC. $40 (New York symbol T; Income Portfolio, Utilities sector; Shares outstanding: 6.1 billion; Market cap: $244.0 billion; WSSF Rating: Average) is investing heavily in its U-Verse television service, which will help offset declining revenue from its traditional phone operations. It currently has 126,000 U-Verse customers, but aims to expand that to 1 million by the end of 2008. The extra spending will cut AT&T’s 2008 earnings by $0.12 a share to $0.14 a share, and offset strong growth at its wireless operations. Still, AT&T will probably earn $3.18 a share in 2007, and the stock trades at just 12.6 times that estimate. AT&T has increased its quarterly dividend by 12.7%, from $0.355 a share to $0.40. The new annual rate of $1.60 yields 4.0%. The company is also using its strong cash flow to buy back shares. Under its latest authorization, it aims to repurchase 6.6% of its shares by the end of 2009....
These three apparel makers have moved down lately, as warmer-than-usual fall weather hurt sales of winter clothing. Cautious consumer spending in the face of rising gas prices and a slowing housing market have also hurt sales. However, all three are doing a good job selling less-profitable businesses and cutting costs. These moves will enhance their long-term profitability. All three are also cheap in relation to earnings. JONES APPAREL GROUP INC. $16 (New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 85.3 million; Market cap: $1.4 billion; WSSF Rating: Average) designs clothing, accessories and footwear under several brands, including Jones New York, Gloria Vanderbilt and Nine West. In September 2007, Jones sold its Barneys New York upscale clothing chain for $858.7 million. The company used the cash to buy back $496.9 million worth of its shares. Jones still has roughly $300 million remaining under its current authorization plan....
Like any year, 2008 could turn out good or bad for investors. But everything I see leads me to believe it will be a year of rising stock prices. First, 2008 is the year of the next U.S. presidential election. As long-time readers know, I view the U.S. presidential election year cycle as the single best indicator for American stock prices. Historically, stock prices are much likelier to rise in the two years leading up to a U.S. presidential election than in the two subsequent years. Some years deviate from the historical pattern, of course. Markets do sometimes fall in presidential election years, and President Bush’s low approval ratings might suggest it could happen in 2008. However, some of the problems that have dogged the Bush administration are improving....
Agilent is a leader in two niche markets: testing equipment for the electronic and medical science industries. Both fields are expanding, and Agilent continues to maintain its dominance with high research spending and selected acquisitions. It’s also using its strong cash flow to buy back shares. AGILENT TECHNOLOGIES INC. $36 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 370.0 million; Market cap: $13.3 billion; WSSF Rating: Average) makes electronic test and measurement equipment. Manufacturers use these products to improve the reliability of a wide variety of electronic products, such as cell phones and communication network components. This business accounts for 60% of Agilent’s revenue. The remaining 40% comes from measurement equipment for medical research labs and drug developers. Agilent’s products also help government agencies test for biological and chemical contaminants in air, water, soil and food....
ATLANTIC TELE-NETWORK $33.55 (Nasdaq symbol ATNI; SI Rating: Speculative) (340-777-8000; www.atni.com; Shares outstanding: 15.2 million; Market cap: $510.7 million) gets about 57% of its revenue from its 80% interest in Guyana Telephone and Telegraph Company (GT&T). The rest comes from its wireless interests in the Caribbean and its expanding telecom interests in the United States. GT&T is the sole local, long distance and international telephone service provider in Guyana, on the northeast coast of South America. Atlantic also owns Choice Communications, which wireless services in the U.S. Virgin Islands. Atlantic’s other interest in the Caribbean is 43% of Bermuda’s largest provider of cellular voice and data services.
U.S. will provide growth
Atlantic continues to expand in the U.S. through Commnet Wireless, which provides voice and data wireless roaming services for U.S. and international carriers in rural areas in the United States. As well, its SoVerNet subsidiary provides wireline voice and data services to businesses and homes in New England....
TAHERA DIAMOND CORP. $0.09 (Toronto symbol TAH; SI Rating: Speculative) (1-877- 777-2004; www.tahera.com; Shares outstanding: 209.8 million; Market cap: $17.8 million) continues to struggle with operational problems at its money-losing Jericho diamond mine. Tahera now plans to undertake a rights offering. This is where existing shareholders can buy more shares depending on the number of shares they now hold. Teck Cominco, which owns 16% of Tahera, won’t participate in the rights offering. Dundee Precious Metals Fund, which owns 8% of Tahera, is unsure whether it will participate....
RESTORATION HARDWARE INC. $6.91 (Nasdaq symbol RSTO; SI Rating: Extra risk) (415-924-1005; www.restorationhardware.com; Shares outstanding: 38.9 million; Market cap: $269.0 million) has agreed to give Sears Holdings, symbol SHLD on Nasdaq, access to its financial data. Sears has said it’s prepared to offer $6.75 a share in cash for each Restoration share if an analysis of the data is positive. That’s higher than an earlier management buyout offer of $6.70 a share. Sears is now Restoration’s largest shareholder with a 13.7% interest. Restoration is now trading above the latest offer, so higher bids are likely. Restoration is still a hold. GABRIEL RESOURCES $1.58 (Toronto symbol GBU; SI Rating: Speculative) (416-955-9200; www.gabrielresources.com; Shares outstanding: 254.9 million; Market cap: $402.7 million) has announced plans to scale back work at its 80%-held Rosia Montana gold project in Romania. The company will cut about two-thirds of the 325 full-time jobs at the project....
SUNOPTA INC. $11.99 (Toronto symbol SOY; SI Rating: Speculative) (905-455-2528; www.sunopta.com; Shares outstanding: 63.9 million; Market cap: $766.1 million) will partner with Central Minnesota Ethanol Co-op to complete feasibility and engineering studies to build a 10-million-gallon cellulosic ethanol plant. The partners will jointly own and operate the plant to be located in Little Falls, Minnesota. The plant will turn wood chips into ethanol. SunOpta’s BioProcess division engineers and sells proprietary steam explosion technology systems that use high heat and pressure to convert biomass such as sugar cane pulp, wood chips and straw into useful components such as ethanol. These waste products are much cheaper and more plentiful than the corn or fresh sugar cane typically used to produce ethanol. SunOpta gets the bulk of its revenues from its Foods division, which specializes in the sourcing, processing and distribution of organic, kosher and specialty food products. Its BioProcess operations are still in their early stages, but they provide a future growth area for the company....