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
CGI GROUP INC. $10.80 (Toronto symbol GIB.A; SI Rating: Speculative) (514-841-3200; www.cgi.ca; Shares outstanding: 328.9 million; Market cap: $3.6 billion) is among the largest independent information technology and business process services firms in North America. CGI and its affiliated companies employ approximately 25,500 professionals. CGI has offices in Canada, the U.S., Europe and the Asia Pacific region. CGI had revenues in the three months ended June 30, 2007 of $933.3 million, up 7.7% from $866.5 million a year earlier. Earnings rose 79.3%, to $64.4 million or $0.20 a share from $35.9 million or $0.11 a share. The earnings increase came from the higher revenue plus cost-efficiency measures. CGI continues to sign new contracts for its computer and business process services. For example, the company recently announced a 10-year $200 million contract agreement with CAE, a 34-month contract for $16.1 million U.S. with the Washington State Children’s Administration and a 5-year contract valued at approximately $9 million with the Calgary Health Region....
SYMANTEC CORP. $18.70 (Nasdaq symbol SYMC; SI Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 882.5 million; Market cap: $16.5 billion) is now starting to realize some of the benefits of its 2005 acquisition of Veritas, which has strengthened its corporate security products. The $13.5 billion deal was one of the biggest software industry acquisitions ever. Meanwhile, Symantec’s consumer business continues to do well, including benefiting from the new Microsoft Vista operating system. In the three months ended June 30, 2007, Symantec’s sales rose 7.7%, to $1.4 billion from $1.3 billion a year earlier (all amounts in U.S. dollars). Earnings per share were unchanged at $0.10. But excluding unusual items, earnings per share were $0.29 in the latest quarter, up 20.8% from a year earlier. Symantec continues to implement its restructuring plan to cut costs. The plan includes a 5% reduction in its workforce. It’s also buying back shares issued in the Veritas purchase. The company spent $1 billion on share repurchases earlier this year and plans to buy back a further $2 billion worth of its stock....
CHESAPEAKE ENERGY $32.51 (New York symbol CHK; SI Rating: Extra risk) (405-848- 8000; www.chkenergy.com; Shares outstanding: 473.5 million; Market cap: $15.4 billion) has pooled its interests with Anadarko Petroleum to evaluate and explore more than one million gross acres in the Deep Haley area of the Delaware Basin in West Texas. The partners will split drilling, completion, production and midstream operations connected with the area. Under the deal, Anadarko received about $310 million in cash plus some of Chesapeake’s non-producing leasehold interests in Texas. Chesapeake received assets including 25% of Anadarko’s existing Deep Haley area production and 25% of Anadarko’s leasehold in the central and eastern parts of the Deep Haley area. Chesapeake Energy is still a buy.
BREAKWATER RESOURCES $2.67 (Toronto symbol BWR; SI Rating: Speculative) (416-363-4798; www.breakwater.ca; Shares outstanding: 418.4 million; Market cap: $1.1 billion) reported 3.2% higher revenues in the three months ended June 30, 2007, to $78.1 million from $75.7 million a year earlier. Earnings per share excluding one-time items were unchanged at $0.08. Breakwater’s Langlois mine, located in north-western Quebec, is now in commercial production. Breakwater already operates three producing base-metal mines: the Myra Falls mine in B.C.; the El Mochito mine in Honduras and El Toqui in Chile. Zinc concentrate sales supply around 82% of the company’s revenue. Zinc is mainly used for galvanizing steel. The rest of Breakwater’s revenue comes from sales of lead, copper, gold and silver....
EUROPEAN GOLDFIELDS $5.22 (Toronto symbol EGU; SI Rating: Speculative) (44 (20) 7408 9534; www.egoldfields.com; Shares outstanding: 178.3 million; Market cap: $930.7 million) owns properties in Greece and Romania. The company is headquartered in the UK. European Goldfields holds a 95% interest in Hellas Gold, after its recent purchase of an additional 30% interest. Hellas owns three gold and base metal deposits in Northern Greece. The deposits are the Stratoni zinc/lead/silver property, the Olympias gold/zinc/lead/ silver project and the Skouries copper/gold property. Production started at Stratoni in September 2005. The company is also selling off a stockpile of goldbearing ore concentrates from the former-producing Olympias mine. Permits to develop the Skouries and Olympias projects are moving steadily forward....
CHIPOTLE MEXICAN GRILL $92.81 (New York symbol CMG.B; SI Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 32.8 million; Market cap: $3 billion) jumped recently after reporting that its earnings per share rose 84.8% in the three months ended June 30, 2007, to $0.61 from $0.33. Revenues rose 33.9%, to $274.3 million from $204.9 million, from new store openings and higher same-store sales. Chipotle now trades at over 43 times its current earnings forecast. The stock is vulnerable to a sharp drop if it fails to meet that forecast, or can’t maintain its rapid growth in revenues and profits. Chipotle is now a hold.
20-20 TECHNOLOGIES INC. $7 (Toronto symbol TWT; SI Rating: Speculative) (514-332-4112; www.2020technologies.com; Shares outstanding: 18.8 million; Market cap: $131.6 million) is a leading maker of computer- aided design, sales, engineering and manufacturing software for the interior design and furniture industries. The Montreal-based company serves clients in 100 countries and markets software in 23 languages. In the three months ended April 30, 2007, revenues rose 8.6%, to $17.5 million from $16.1 million a year earlier. (All figures except share price in U.S. dollars.) Earnings per share were unchanged at $0.09. Cash flow per share was $0.17 in the latest quarter. That means the stock now trades for a low 10.3 times cash flow. 20-20 Technologies also holds a high cash balance of $35.3 million or $1.88 a share. 20-20 Technologies spends a high 15% of sales on research to stay ahead of the competition....
In our July 27 Stock Pickers Hotline, I said the market downturn that had just begun could carry on till October and knock another 5% to as much as 15% off the market indexes. That’s still my view. I doubt that the liquidity problems are going to spread. I do think that subprime lending is dead for five years or more. This will hurt real estate and related industries. But ultimately it could lead to new profit opportunities in other areas. That’s because former subprime borrowers will quit overextending themselves on housing and instead spend their money on consumer goods, investments, education for their children and so on....
METRO INC. $34.04 (Toronto symbol MRU.A; SI Rating: Extra Risk) (514-643-1055; www.metro.ca; Shares outstanding: 115.3 million; Market cap: $3.9 billion) is a leader in the food distribution business in Quebec, operating Metro supermarkets, Super C discount supermarkets and Marche Richelieu neighbourhood stores. It also operates Loeb stores in northeastern Ontario. Metro expanded further into Ontario in 2005 with the acquisition of A&P Canada for $1.7 billion. A&P Canada operates 244 food stores throughout Ontario under the A&P, Dominion, Food Basics, The Barn and Ultra Food & Drug banners. Metro’s ongoing earnings in its fiscal third quarter ended July 7, 2007 rose 16.3%, to $91.1 million or $0.78 a share, from $78.3 million or $0.68 a share. This excludes one-time charges from acquisitions and other sources. Sales rose slightly, to $3.341 billion from $3.337 billion, but rose 3.2% excluding wholesale interests divested one year earlier. Metro’s shares yield 1.4%....
NCR CORP. $49.77, New York symbol NCR, has fixed the terms of its planned spin-off of subsidiary Teradata Corp. NCR stockholders will receive a special dividend of one Teradata common share for each NCR share they own. The dividend is a tax-free distribution. NCR stockholders will only have to pay capital gains taxes on Teradata when they sell the stock. Teradata will trade on New York, symbol TDC. The stock will begin trading on a “when issued” basis on September 14. Regular trading begins October 1. Teradata makes computers and software that capture and store large quantities of a business’s data, such as its sales and inventory. Analyzing this data to identify buying habits and trends helps Teradata clients make better decisions and expand profits....