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
NISSAN MOTOR CO. $20.37 (Nasdaq symbol NSANY; SI Rating: Above-average) (310-771-3111; www.nissanmotors.com; Shares outstanding: 2.3 billion; Market cap: $46.0 billion) reports that its sales rose 12.7% in the three months ended September 30, 2007, to $21.9 billion from $19.5 billion. (All figures in U.S. dollars.) Profits fell 26.8%, to $1 billion from $1.4 billion. However, the profit decline was largely due to a higher tax rate and less favorable one-time items in the latest quarter. Nissan’s focus on new models is now paying off, especially in the U.S. market. In October, U.S. sales rose 12.4% to 74,992 vehicles from a year earlier. Car sales rose 26.7% to 40,736 units in the month. Truck sales totaled 34,256 vehicles, rising 2.2% from 33,528 units....
SYMANTEC CORP. $17.52 (Nasdaq symbol SYMC; SI Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 867.3 million; Market cap: $15.2 billion) reported 12.6% higher revenues in its second fiscal quarter ended September 30, 2007, to $1.42 billion from $1.26 billion. Excluding one-time write-downs, earnings per share rose 11.5%, to $0.29 from $0.26 a year earlier. Symantec continues to invest heavily in research — spending $221.1 million in the latest quarter, or a high 16% of sales. This spending will let it maintain its lead in the competitive and rapidly changing virus protection, firewall, vulnerability management, security services and intrusion detection industries in which it operates....
DUNDEE REIT $36.65 (Toronto symbol D.UN; SI Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 20.8 million; Market cap: $762.3 million) owns and operates 6.3 million square feet of office, industrial and retail properties. It now holds 40 office buildings and 37 industrial properties. The company is now focused on mid-sized urban and suburban office and industrial properties in western Canada. Earlier this year, it sold its Ontario, Quebec and Newfoundland properties to GE Real Estate for $2.4 billion. As part of the transaction, GE Real Estate bought $165 million of Dundee REIT units at $47.50 per unit. GE Real Estate now holds a 16% equity interest in Dundee REIT. Revenues were $39.6 million in the three months ended September 30, 2007, up 34.4% from $29.5 million a year earlier. The best measure of operating performance for a real estate company is cash flow. Dundee’s cash flow per share in the latest quarter was $0.58, up 3.6% from $0.56....
DOMINO’S PIZZA $13.25 (New York symbol DPZ; SI Rating: Average)(734-930-3030; www.dominos.com; Shares outstanding: 62.0 million; Market cap: $821.1 million) reported 3.3% lower revenues in the three months ended September 30, 2007, to $337.3 million from $326.7 million. Excluding one-time items, earnings per share fell 50%, to $0.17 from $0.34. Earnings suffered due to higher labor, food and packaging costs, combined with weak U.S. consumer demand. Domino’s continues to implement marketing and operating programs to improve its sales in the United States. It also has lots of room for expansion in international markets. Lower interest rates should also boost consumer confidence and spending on discretionary items such as pizza....
AASTRA TECHNOLOGIES $30.71 (Toronto symbol AAH; SI Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 16.0 million; Market cap: $491.8 million) develops and markets products and systems for accessing communication networks, including the Internet. Aastra’s products include residential and business telephone terminals, screen telephones capable of accessing Internet content, cable modems, network access servers and digital video encoders, decoders and gateways for the broadcast, cable and telecommunications market. To cut risk, Aastra outsources all of its manufacturing. In the three months ended September 30, 2007, Aastra’s revenues fell 1.1%, to $141.1 million from $142.8 million. However, earnings per share rose 63%, to $0.44 from $0.27 on lower expenses. Sales in Europe were flat at $117.1 million, mainly due to weaker sales in France. North American revenues fell 4.8%, to $24 million, because of slower U.S. sales and the impact of a stronger Canadian dollar....
At Stock Pickers Digest, we look for aggressive investments that combine high potential with low risk. It’s a difficult job. All aggressive investments — ours included — expose you to more risk than you find in the conservative investments we recommend in The Successful Investor, our flagship advisory. (That’s why we advise you to limit your aggressive investments to a third of your total portfolio.) But we try to cut your risk by applying the conservative approach of The Successful Investor. That has the welcome side effect of making takeovers far more common among our buys....
TIM HORTONS $37.38 (Toronto symbol THI; SI Rating: Average) (905-845-6511; www.timshortons.com; Shares outstanding: 187.9 million; Market cap: $7.0 billion) operates 2,758 coffee-and-donut shops in Canada, and 352 in the United States. Franchisees operate 97.7% of its stores. Tim Hortons’ revenues rose 18.6% in the three months ended September 30, 2007, to $490.5 million from $413.6 million. The increase was due to the opening of 40 new restaurants, successful new menu items and higher selling prices. Same-store sales rose 7.5% in Canada, and 4.5% in the United States. Earnings per share rose 33.3%, to $0.36 from $0.27. The company continued to introduce successful new products in the latest quarter to boost sales. At Canadian stores, this included the popular Breakfast Sandwich, Lemon Crinkle Donuts, 12-Grain Bagel with Omega 3, Fruit Bites and Apple Toffee Danish. In the United States, the new offerings included iced coffee, the Lemon Crinkle Donut, the Apple Toffee Danish, large gourmet cookies and chocolate baked goods. The company is now testing specialty coffee in its Canadian stores....
NEWELL RUBBERMAID INC. $26.66, New York symbol NWL, fell 8% this week after it warned that its fourth-quarter sales would be unchanged from a year earlier. That’s mainly due to slowing sales of office products such as pens and desktop accessories. Despite the lower sales, Newell still expects to earn $1.80 a share in 2007 thanks to its cost-cutting plan. The stock trades at just 14.8 times that estimate. Newell Rubbermaid is a buy. SONY CORP. ADRs $55.00, New York symbol SNE, gained over 10% this week after state-owned Dubai International Capital announced that it had acquired a “substantial” stake in the company. The stake is likely under 5%, because Japanese securities law requires a full public disclosure from Sony on any holding over 5%....
BANK OF AMERICA CORP. $44.37, New York symbol BAC, has moved down lately along with most financial services stocks, mainly due to concerns over liquidity problems with securities backed by mortgages and other assets. That makes it difficult to assess the market value of these securities. Bank of America will take a $3 billion pre-tax charge in the fourth quarter of 2007 due to writedowns of asset-backed securities. That’s equal to 1.5% of its market cap of $204 billion. Bank of America still has $16 billion worth of these securities, including $12.1 billion tied to subprime mortgages, so it may face more writedowns if conditions worsen. Bank of America closed its subprime mortgage business in 2001, so its overall credit quality is still strong. Its retail banking, credit card and wealth management operations are also performing well....
WASHINGTON MUTUAL INC. $20.51, New York symbol WM, fell $5 after it said its credit losses for 2007 would be roughly double its earlier prediction. An investigation into the mortgage industry by New York State’s Attorney General also weighed on the stock. The probe is looking for evidence that Washington Mutual pressured an insurance company to inflate home values in appraisals, making it possible for borrowers to obtain mortgages they couldn’t otherwise afford. When it appears a company has acted criminally, we always consider whether we should apply the cockroach theory – one criminal act, like one cockroach, may be a sign that the place is full of them. However, it’s far from clear that Washington Mutual acted unethically, much less criminally. Real estate appraisal involves a lot of judgment and appraisers tend to be conservative. Even if the allegations turn out to be true, they may only appear improper in hindsight, because home values later dropped....