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
Boeing continues to win new orders for its 787 Dreamliner plane. The company has now sold over 700 Dreamliners, and aims to begin deliveries next year. Sales could expand further if the aircraft performs as expected. Boeing already profits as the one of the world’s largest makers of commercial aircraft. It’s also a leading defence and space contractor. The prospects for the 787 just add to its appeal. THE BOEING CO. $94 (New York symbol BA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 777.2 million; Market cap: $73.1 billion; WSSF Rating: Above average) is the world’s second-largest maker of commercial aircraft, behind Europe’s Airbus. This business accounts for 50% of its revenue and 60% of its profits....
In our July 27 Hotline, I said the market could ultimately knock 5% to as much as 15% off the market indexes. But I felt losses would be temporary and markets would go on to new highs in 2008. That view is unchanged. However, stocks could stay volatile over the next few months, while remaining within a range between the peak prices of July and the lows of August. When the market finally does launch a sustained rise, it could gain 10% to 20% by mid-2009. But it may go through a series of wild fluctuations before launching that sustained rise....
SHERMAG INC. $1.74 (Toronto symbol SMG; SI Rating: Speculative) (819-566-1515; www.shermag.com; Shares outstanding: 13.3 million; Market cap: $23.7 million) has suffered the past few years from the strength of the Canadian dollar, which raises its export prices to the U.S. market, and from high production expenses. Shermag has started to close plants and shift production to China to cut costs. However, it’s still losing money. Shermag reported 31% lower sales in its fiscal first quarter ended June 29, 2007, to $29.3 million from $42.5 million. The company lost $0.29 a share, compared to a loss $0.33 a share a year earlier. Last year it lost $1.30 a share, and the year before $2.39 a share.
New board member sparks share rise
Shermag’s shares rose recently after the announcement that activist investor George Armoyan will join Shermag’s board of directors. Shermag’s president has stepped down from the board to provide a seat. Armoyan now controls the five-member board....
ACI WORLDWIDE $22.86 (Nasdaq symbol ACIW; SI Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 35.8 million; Market cap: $817.6 million) sells electronic payments systems software and services to more than 800 clients in 84 countries, including many of the world’s largest financial institutions. ACI reported 15.7% higher revenues in the three months ended June 30, 2007, to $98.1 million from $84.8 million. However, excluding one-time items, earnings fell 67.5%, to $3.7 million or $0.10 a share from $11.4 million or $0.31 a share. Cash flow per share fell 80%, to $0.09 from $0.45. Earnings were hurt by a 34.6% rise in operating expenses to $93.2 million from $69.2 million. Research and development spending rose 31.7%, to $13.4 million or 13.7% of revenues. Administrative expenses rose 65%, to $26.2 million from $15.9 million....
DUNDEEWEALTH INC. $18.65 (Toronto symbol DW; SI Rating: Speculative) (1-800-301-6745; www.dundeewealth.com; Shares outstanding: 144.3 million; Market cap: $2.7 billion) is up over 40% since CI Financial Income Fund, symbol CIX.UN on Toronto, launched a hostile $2.36 billion takeover bid for the company. CI Financial will pay 0.75 of a CI unit for each DundeeWealth share. Based on today’s CI Financial unit price of $27.07, the 0.75 per unit offer is worth $20.33 per DundeeWealth share. Dundee Corp., DundeeWealth’s controlling shareholder, has rejected the offer. One condition of CI Financial’s initial purchase offer was that DundeeWealth drop its plan to sell 27.3 million new DundeeWealth shares to Scotiabank at $12.76 a share. The sale would give Scotiabank an 18% interest in DundeeWealth. However, CI Financial dropped this condition in an effort to persuade Dundee Corp. to accept its offer, and Scotiabank has since purchased the shares....
RUBY TUESDAY, INC. $15.92 (New York symbol RT; SI Rating: Speculative) (865-379- 5700; www.rubytuesday.com; Shares outstanding: 51.7 million; Market cap: $823.1 million) reports 2.4% higher revenues in the three months ended September 4, 2007, to $346.8 million from $338.7 million a year earlier. However, excluding one-time items, earnings per share fell 29.7%, to $0.26 from $0.37. Higher gasoline prices and interest rates limited consumer spending in the latest quarter. Ruby Tuesday also suffered due to lower-priced offerings from competitors. The company is still re-positioning itself as offering higher quality food but at higher prices. However, we think Ruby Tuesday will succeed in improving its menu, service and advertising to attract customers....
DELPHI ENERGY $1.76 (Toronto symbol DEE; SI Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 68.1 million; Market cap: $119.8 million) is engaged in the exploration, development and production of oil in east-central Alberta, and natural gas in northeast Alberta and northeast British Columbia. Natural gas makes up 84% of daily production. In the three months ended June 30, 2007, Delphi’s revenue fell 4.2%, to $24.8 million from $25.9 million. Cash flow per share fell 34.6%, to $0.17 from $0.26. The declines came from lower production after asset sales, and high operating costs. Delphi’s average daily output fell 7.8% in the latest quarter, to 5,379 barrels of oil equivalent from 5,834 barrels. However, recent exploration successes will add about 1,000 barrels of oil equivalent production per day in the fourth quarter. Delphi is now forecasting that production will rise to 6,000 barrels per day in the first quarter of 2008....
ENDEV ENERGY INC. $0.82 (Toronto symbol ENE; SI Rating: Speculative) (1-888-739-4623; www.endevenergy.com; Shares outstanding: 89.4 million; Market cap: $73.3 million) explores for and develops oil and natural gas in central Alberta. Production is weighted 24% toward crude oil and liquids and 76% natural gas. In the three months ended June 30, 2007, Endev’s revenue rose 26.5%, to $17.4 million from $13.8 million. Cash flow per share rose 25%, to $0.10 from $0.08. Endev’s average daily output rose 12.5% in the latest quarter, to 4,000 barrels of oil equivalent from 3,555 barrels. In 2007, Endev expects to spend a total of $40 million on exploration and development. It plans to raise output to around 4,300 barrels....
Most junior natural gas producers are now trading near their lows for the year on investor worries that gas prices will remain low, or even drop further. Natural gas prices are now at about $7.37 U.S. per million British thermal units. That’s up from $6.40 in August, but down from just over $9 earlier this year. Prices touched $16 in late 2005. Nobody can predict natural gas prices with any certainty. Prices are too dependent on the weather and other volatile, unpredictable factors. However, we think that the longer-term outlook for natural gas prices is positive....
VERIGY LTD. $23.41 (Nasdaq symbol VRGY; SI Rating: Speculative) (1-800-447-8378; www.verigy.com; Shares outstanding: 58.8 million; Market cap: $1.4 billion) designs and makes test systems used in computer-chip production. Verigy’s revenues in the three months ended July 31, 2007 fell 4.7%, to $204 million from $214 million a year earlier. Excluding one-time charges, it earned $0.52, down 23.5% from $0.68. Revenues and profits slowed due to overall weakness in the semiconductor test industry from a year earlier. But thanks to its balanced product portfolio, revenues in the latest three months were up 11% from $183 million in the prior quarter ended April 30, and earnings per share rose 38.9% from $0.36....