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
BECKMAN COULTER INC. $72 (New York symbol BEC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 62.6 million; Market cap: $4.5 billion; WSSF Rating: Average) rose to $77 in July after a competitor accepted a takeover offer from Germany’s Siemens AG. Investors felt that Beckman, which has no controlling stockholder and a loyal customer base, would make an attractive target for a larger medical products company, or a conglomerate like General Electric. Regardless of takeover possibilities, Beckman continues to expand its sales and profits. In the second quarter of 2007, sales grew 11.9%, to $689.7 million from $616.3 million a year earlier. It earned $0.75 a share (total $47.8 million) before unusual items, up 8.7% from $0.69 a share ($43.8 million). Beckman spends around 9% of its sales of $41.60 a share on research, so it’s more profitable than it appears. Beckman is now selling more low-margin lab systems, which could hurt its profit growth. But that should spur demand for supplies, which provide stability and cut risk. Cost cuts should also aid future earnings. For example, Beckman’s upcoming relocation of one of its main plants will save it $7 million a year....
It pays to include some oil and natural gas stocks in your portfolio, as an inflation hedge and for exposure to the Resources sector. Even so, we still advise against over-indulging in oil and gas stocks. Global demand for oil and gas will continue to rise. But no one can consistently predict oil and gas price prices. Both will continue to go through wild swings in price. So you’ll profit most with highquality stocks that will prosper even during the inevitable price setbacks. These three energy stocks are down from their peaks over the last couple of months, but are still up from the start of this year. Although all are attractive in relation to earnings and cash flow, only two are buys right now....
SONY CORP. ADRs $46 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap; $46.0 billion; WSSF Rating: Above average) aims to increase sales of its PlayStation 3 video game console with a new add-on device called “PlayTV”. This product will let users record and play back high-definition movies and TV shows. Sales of PlayStation 3 have lagged behind new consoles from Microsoft and Nintendo, mostly due to its higher price. But sales should improve as software companies release more games that take advantage of the PlayStation 3’s advanced processing and video chips. Another key to PlayStation 3’s long-term success is its ability to play high-definition Blu-ray DVD movies. Although Paramount Pictures and its affiliate DreamWorks recently decided to back HD-DVD, a rival high-definition format, other major studios including Sony’s own Columbia Pictures will continue to support Blu-ray. Leading retailers such as Target and Blockbuster are also dropping HD-DVD players and movies in favor of Blu-ray....
AMERIPRISE FINANCIAL INC. $61 (New York symbol AMP; Conservative Growth Portfolio, Finance sector; Shares outstanding: 235.3 million; Market cap: $14.4 billion; WSSF Rating: Average) provides brokerage, mutual funds and wealth management services to individuals and institutions through over 12,000 advisors. The stock has gained over 60% since its spin-off from American Express, as the strong performance of the stock market in the past two years has boosted assets under management. Ameriprise now trades at 15.6 times the $3.90 a share it’s forecast to make in 2007. The $0.60 dividend yields 1.0%. Ameriprise now aims to focus more on its asset management businesses. That should increase its fee-based income, which provides it with a steady stream of recurring revenues....
Like all lenders, American Express is vulnerable to a slowdown in business due to the subprime mortgage and credit liquidity problem. However, the company’s traditional focus on cardholders with above-average incomes and credit histories will keep loan losses to a minimum. Meanwhile, the company continues to prosper as credit card use expands not only in the United States, but also in increasingly prosperous developing nations like China and Russia. AMERICAN EXPRESS CO. $58 (New York symbol AXP; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $69.6 billion; WSSF Rating: Average) is one of the world’s biggest financial services companies, with offices in over 130 countries. Warren Buffett’s Berkshire Hathaway owns about 13% of the company....
In our July 27 Hotline, I said the market downturn could go on till October. I felt it could ultimately knock another 5% to as much as 15% off the market indexes, from July 27 levels. However, I felt the index losses would be temporary and markets would go to new highs in 2008. I also felt speculative areas would suffer most of the lasting damage. Risk is always higher in speculative stocks, and prices of many speculatives have risen out of proportion to value. That’s still how I see things. The market has had some really jolting down days in the past month, but the overall situation is unchanged....
LOJACK CORP. $20.90 (Nasdaq symbol LOJN; SI Rating: Speculative) (www.lojack.com; 1-781-326-4700; Shares outstanding: 18.8 million; Market cap: $393.5 million) sells vehicle theft recovery systems. The company has two main products: the LoJack Vehicle Recovery System and the LoJack Early Warning System. LoJack operates in the U.S. and 29 other countries around the world. In Canada, the company operates through its subsidiary, Boomerang Tracking. LoJack’s recovery systems use radio frequency technology to track stolen vehicles. Once a customer realizes a vehicle is stolen, they contact police. Local police cruisers and aircraft equipped with LoJack technology (supplied at no cost by LoJack to law enforcement agencies) are led to the tracking device. In the three months ended June 30, 2007, LoJack’s sales rose 2.6%, to $58.2 million from $56.7 million. However, earnings rose 21.8%, to $6.7 million or $0.35 a share, from $5.5 million or $0.29. That’s because it has successfully cut costs, in manufacturing as well as other areas. Cash flow rose 28.6%, to $9.7 million or $0.51 a share, from $7.5 million or $0.39....
CELTIC MINERALS $1.13 (Toronto symbol CME; SI Rating: Start-up) (403-261-2890; www.celticminerals.com; Shares outstanding: 60.0 million; Market cap: $67.7 million) jumped from $0.40 to as high as $1.24 recently after it made a promising discovery at its 100%-owned Kingurutik property in Labrador, 85 kilometers northeast of Inco- CVRD’s big Voisey’s Bay mine. The results came from two grab samples (rocks lying on the surface of the ground) broken off from a frost-heaved outcrop. Grab samples are about the earliest stage of any exploration effort. However, one sample yielded a high 1.09% nickel and 0.2% copper, the other an equally impressive 0.91% nickel and 0.59% copper. As a result of this new discovery, Celtic increased its Kingurutik claims from 90 to 2,056 claims totalling 514 square kilometers. It’s now bringing in two drill rigs for a 5,000- meter drill program....
CENTERRA GOLD $5.93 (Toronto symbol CG; SI Rating: Speculative) (416-204-1953; www.centerragold.com; Shares outstanding: 216.2 million; Market cap: $2.5 billion) dropped recently after it said it now expects 2007 gold production at its Kumtor mine in Kyrgyzstan to fall about a third below previous forecasts. The pit wall at Kumtor has developed structural problems. That means Centerra will have to remove more waste than previously planned when it expands the pit. That will block access to high-grade ore until the second quarter of 2008. Centerra now forecasts 2007 gold production of about 300,000 ounces at Kumtor, compared with its previous forecast of nearly 450,000 ounces. Despite the technical problems, Centerra is still a buy for aggressive investors....
HOME CAPITAL GROUP $34.97 (Toronto symbol HCG; SI Rating: Extra Risk) (1-800- 990-7881; www.homecapital.com; Shares outstanding: 34.5 million; Market cap: $1.2 billion) has recovered most of its price decline after rising credit quality concerns, especially around subprime mortgages, hurt U.S. markets and financial stocks in general. Subprime mortgages are loans made to borrowers with weak credit histories. However, Home Capital says it has no exposure to the U.S. mortgage market. Home Capital reports that its revenues rose 28.0% in the three months ended June 30, 2007, to $87.7 million from $68.5 million a year earlier. Earnings per share rose 33.3%, to $0.64 from $0.48. The company has raised its quarterly dividend 10%, to $0.11 a share, for a current yield of 1.3%....