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
YAMANA GOLD $12.65 (Toronto symbol YRI; SI Rating: Speculative) (416-815-0220; www.yamana.com; Shares outstanding: 353.8 million; Market cap: $4.5 billion) has extended its hostile $3.2 billion takeover bid for Meridian Gold. About 34.3 million shares or 34% of Meridian shares were submitted by September 11, but two-thirds of Meridian shares are needed to approve the Yamana bid. Yamana is offering Meridian shareholders $4 in cash plus 2.235 Yamana shares. Two potential Meridian bidders recently withdrew their interest, which likely eliminated the emergence of a friendly ‘white knight’ buyer for Meridian. However, Yamana may need to increase its bid, if it fails to gain sufficient shares. About one-third of Meridian shares are held by institutional investors. These shareholders appear to be holding on for a higher bid. Yamana Gold is still a buy....
NISSAN MOTOR CO. $19.92 (Nasdaq symbol NSANY; SI Rating: Above-average) (310-771-3111; www.nissanmotors.com; Shares outstanding: 2.3 billion; Market cap: $45.0 billion) is Japan’s second-largest automaker after Toyota and just ahead of Honda. Nissan’s car models include Maxima and Sentra, and the more upscale Altima and Infiniti. Other models include Frontier pickups, the 350Z sports car, and the Xterra and Pathfinder SUVs. The company’s major plants are in Japan, but it also builds cars and trucks in the U.S., U.K., Mexico, Spain and Australia. In the fiscal first quarter ended June 30, 2007, Nissan’s revenues rose 11%, to 2.4 trillion yen ($20.4 billion U.S.) from 2.2 trillion yen ($18.4 billion) a year earlier. The revenue increase came from a 5.9% increase in vehicle sales to 875,000 units. Despite the sales increase, profits fell 16.2%, to 92.3 billion yen ($7.7 billion U.S., or $0.47 per ADR) from 110.2 billion yen ($9.2 billion U.S. or $0.37 per ADR). The lower earnings came from a higher tax rate and raw material price increases, but also from a lack of higher profit-margin new vehicle offerings....
BROADRIDGE FINANCIAL SOLUTIONS $18.95 (New York symbol BR: SI Rating: Extra risk) (201-714-3000; www.broadridge.com; Shares outstanding: 139.3 million; Market cap: $2.6 million) reported an 8% rise in revenues for the three months ended June 30, 2007, to $780.3 million from $722.8 million from a year earlier. Excluding one-time items, profits rose 13.3% to $114 million or $0.82 a share from $100.7 million or $0.72 a share. Broadridge provides three types of services to the investment industry: investor communications; securities processing; and transaction clearing, trade settlements and other back office operations. The company’s systems help both large and small clients cut their costs while it profits from the continuing fall in the cost of computing. Broadridge is still a buy.
TIM HORTONS $34.59 (Toronto symbol THI; SI Rating: Extra Risk) (905-845-6511; www.timshortons.com; Shares outstanding: 189.7 million; Market cap: $6.6 billion) reports 14.4% higher revenues in the three months ended July 1, 2007, to $465.3 million from $406.8 million. Earnings per share fell 7.7%, to $0.36 from $0.39. However, the decline came mostly from a higher effective tax rate. Meanwhile, Tim Hortons will begin opening stores in Wal-Mart Canada Supercentres later this year. The first Tim Hortons will appear at Wal-Mart locations in Edmonton and Lethbridge in Alberta and Brockville, Ontario. Seven stores should be operating by early 2008, with further locations in Alberta and Ontario. Later this year, Tim Hortons expects that all of its stores will accept payment by MasterCard. As well, it plans to launch a debit-style cash ‘Tim Card’....
COMPUTER MODELLING GROUP $14.17 (Toronto symbol CMG; SI Rating: Speculative) (403- 531-1300; www.cmgl.ca; Shares outstanding: 8.3 million; Market cap: $117.6 million) is a computer software technology and consulting company specializing in the oil and gas industry. Its software provides engineers with oil and gas reservoir simulation, and three-dimensional visualization and animation. The company has over 250 clients worldwide in 45 countries. Computer Modelling’s revenues in the three months ended June 30, 2007 rose 20.4%, to $5.6 million from $4.6 million. Earnings per share were unchanged at $0.13. Revenues in the latest quarter included contract research revenues of $1.4 million, up 60% from $867,000 a year earlier. However, earnings were flat as the added revenues were offset by additional staff, travel and other overhead expenses related to the contract research projects....
GABRIEL RESOURCES $2.26 (Toronto symbol GBU; SI Rating: Speculative) (416- 955-9200; www.gabrielresources.com; Shares outstanding: 254.8 million; Market cap: $576.0 million) now faces a court challenge to its 80%-held Rosia Montana gold project in Romania. As a result, the Romanian government has suspended the environmental review process for the project. Gabriel has obtained legal opinions to support its view that the court challenge is without merit. It also believes that it has the support of the Romanian government. However, it will need to overcome this latest attempt to block the project. The risks of investing in Gabriel Resources are high, and a successful conclusion to the permitting process is still not certain. But we continue to see it as a buy for highly aggressive investors.
ZARGON ENERGY TRUST $27.40 (Toronto symbol ZAR.UN; SI Rating: Speculative) (403-264- 9992; www.zargon.ca; Shares outstanding: 17.0 million; Market cap: $466.2 million) has oil and gas production assets in Alberta, Manitoba, Saskatchewan and North Dakota. Output is weighted 56% toward gas and 44% to oil. In the three months ended June 30, 2007, Zargon reported cash flow per unit of $1.05, down 7.9% from $1.14 a year earlier. Production rose 1.7%, to 8,465 barrels of oil equivalent per day, from 8,322 barrels. The lower cash flow came from lower oil prices. Zargon now trades at around 6.5 times cash flow. The company’s debt of $46.7 million is equal to just over two quarters’ cash flow....
So far, the market downturn seems to have stayed within the limits we envisioned for it in our July 27 Stock Pickers Digest Hotline, and last month’s issue. However, no one can consistently predict the market’s future. That’s why you need to take a portfolio approach to your investments, including any aggressive investments you hold. Our aggressive recommendations vary widely in risk, but we stay away from “all-or-nothing” aggressive stocks that can evaporate overnight. We prefer aggressive investments that can prosper on a variety of fronts....
SUNOPTA INC. $14.76 (Toronto symbol SOY; SI Rating: Speculative) (905-455-2528; www.sunopta.com; Shares outstanding: 63 million; Market cap: $929.8 million) has three business units: 1) SunOpta Foods operates in every stage of the purchasing, processing and distribution of organic, kosher and specialty food products from seeds to packaging. It sells these under its own brand names, as well as to private label and food service customers. 2) TSX-listed Opta Minerals, 70.6% owned, mainly sells abrasives, roofing shingle granules and other industrial minerals....
MICROSOFT CORP. $29.46, Nasdaq symbol MSFT, still loses money on each Xbox video game machine it sells, six years after the launch of the first console. Costs to fix a recent Xbox defect also hurt Microsoft’s earnings in its latest quarter. But the company feels profits from selling games will offset these losses. For example, Microsoft sold more than 1.7 million copies of the new Halo 3 video game this week for $170 million. Strong interest in Halo 3 should spur more console sales, and increase demand for online gaming services. Microsoft is a buy. CHEVRON CORP. $93.58, New York symbol CVX, continues to enjoy strong cash flow thanks to rising oil prices. It now plans to buy back up to $15 billion of its stock in the next three years. That’s roughly 7% of its market cap. Share repurchases reduce the number of shares outstanding, and increase future per-share earnings and cash flow....