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
NORDSTROM INC. $52 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 257.7 million; Market cap: $13.4 billion; WSSF Rating: Average) continues to profit from its focus on upscale clothing and footwear. That’s because demand for these goods tends to be less vulnerable to higher gas prices and interest rates. Better inventory management has also cut the need for costly clearance sales. In its first fiscal quarter ended May 5, 2007, earnings rose 25.0%, to $0.60 a share from $0.48 a year earlier. Sales rose 8.3%, to $1.95 billion from $1.8 billion, while same-store sales grew 9.5%. Same-store sales will probably rise about 4% in the current fiscal year, and the company will probably earn $2.90 a share. That implies a p/e of 17.9, which is reasonable in light of Nordstrom’s loyal clientele....
FEDERATED DEPARTMENT STORES INC. $39 (New York symbol FD; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 459.2 million; Market cap: $17.9 billion; WSSF Rating: Average) plans to change its name to Macy’s Inc. (New York symbol M) on June 1, 2007. Federated is doing a good job converting former May Department Stores to its own Macy’s and Bloomingdale’s banners, and selling surplus stores. It has also sold most of May’s bridal and formalwear businesses, as well as certain credit card receivables. It used the $4.4 billion it received for these assets to buy back $2.5 billion worth of its stock. It aims to buy back a further $4 billion of stock in the current fiscal year. The company now hopes to expand customer traffic in its stores with new in-store restaurants and Starbucks coffee outlets. It also feels new investments in its catalog and Internet operations will expand sales....
DOW JONES & CO. INC. $53 (New York symbol DJ; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 83.8 million; Market cap: $4.4 billion; WSSF Rating: Above average) continues to trade below News Corp.'s takeover offer of $60-a-share, as it looks like enough members of the Bancroft family plan to oppose it. The family controls 82.4% of the company’s class B shares, which carry 10 votes per share. If you include their regular stock holdings, they control 64.2% of the company’s total votes. The stock will probably make little progress unless News Corp. raises its bid, or Dow Jones finds another buyer. The stock is a hold. GANNETT CO. INC. $58 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 234.7 million; Market cap: $13.6 billion; WSSF Rating: Above average) also moved up on speculation that it could become a takeover target. Unlike Dow Jones, it has no controlling stockholder. But it owns several under-appreciated media assets, including USA Today, the nation’s largest newspaper by circulation....
In September 2000, the original Dun & Bradstreet broke itself up into two public companies: Moody’s, and the new Dun & Bradstreet. Unlike a spin-off, where a company hands out shares of a subsidiary to its own stockholders, this break-up created two large firms with well-established brands and clientele. That cut the likelihood investors would sell their new shares. Since the split, Dun & Bradstreet is up 506.3%, while Moody’s has gained 421.4%. We still like both companies, but see only one as a buy right now....
ARCHER DANIELS MIDLAND CO. $36 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 652.7 million; Market cap: $23.5 billion; WSSF Rating: Above average) earned $0.56 a share in its third fiscal quarter ended March 31, 2007, up 5.7% from $0.53 a year earlier. If you disregard a one-time gain, earnings fell 3.8%, to $0.51 a share. Sales grew 25.3%, to $11.4 billion from $9.1 billion. The company blamed the weaker earnings on rising prices for corn, a key component in its food processing operations. However, the high prices have also prompted farmers to plant a record amount of corn this year, and the extra supply should help bring down Archer Daniels’s input costs. Lower corn prices will also help expand profits at Archer Daniels’s ethanol operations. Although new capacity has hurt ethanol prices in the past few months, government regulations mandating its use as a gasoline additive should keep prices stable. Archer Daniels is also looking at developing new types of biofuels, such as fuels for military jets....
DELPHI ENERGY $1.85 (Toronto symbol DEE; SI Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 68 million; Market cap: $125.8 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 the company’s daily production. In the three months ended March 31, 2007, Delphi reported cash flow per share of $0.17, down 22.7% from $0.22 a year earlier. Cash flow per share fell, mostly due to lower production, partly offset by higher realized oil and gas prices.
Delphi’s production is rising
Total output averaged 4,322 barrels of oil equivalent per day in the quarter. That’s a 13.7% decrease from 5,011 barrels a year earlier. However, the company finished the quarter with output of 5,100 barrels. Delphi soon plans to add 500 barrels of oil equivalent per day to production from its Tower Creek site. The company expects to average approximately 5,300 barrels of production in 2007. It expects to exit 2007 with production of at least 5,700 barrels per day....
IPSCO INC. $173.34 (Toronto symbol IPS; SI Rating: Average) (800-667-1616; www.ipsco.com; Shares outstanding: 47.2 million; Market cap: $8.2 billion) has now agreed to a takeover offer from specialty steel producer SSAB of Sweden. SSAB intends to pay $160 U.S. a share ($177.44 Cdn.) for IPSCO. IPSCO’s board of directors has endorsed the offer. The stock is now trading below the takeover price, which suggests this bid will succeed. However, a competing offer could still emerge. Bidders could include Nasdaq listed Steel Dynamics, the fifth-largest U.S. steel maker, as well as Evraz Group SA, Russia’s biggest steel company. For now, IPSCO is a hold.
TEMPUR-PEDIC $25 (New York symbol TPX; SI Rating: Speculative)(800-878-8889; www.tempurpedic.com; Shares outstanding: 83 million; Market cap: $2.0 billion) reports that in the three months ended March 31, 2007, its sales rose 16.4%, to $226 million from $228.6 million a year earlier. Total earnings rose 10.7%, to $29.8 million from $26.9 million. Earnings per share rose 20.7%, to $0.35 from $0.29, because it now has fewer shares outstanding due to share buybacks. The company now expects to report earnings for this year of $1.54 to $1.58 a share. The stock trades at 16.0 times the average of this year’s estimate. Part of the company’s success has come from introducing new products. For example, it now plans to join with medical bed maker Hill-Rom to develop and make a line of bed surfaces for acute care institutions in North America....
CELTIC MINERALS $0.41 (Toronto symbol CME; SI Rating: Start-up) (403-261-2890; www.celticminerals.com; Shares outstanding: 60.0 million; Market cap: $24.6 million) has as its main asset a 50% interest in the 113 square kilometer West Voisey’s Bay project, located on the southwestern edge of Inco’s Voisey’s Bay nickel mine and property in Labrador. Celtic hopes to discover a deposit similar to Inco’s Voisey’s Bay orebody on its West Voisey’s Bay property. Celtic is also adding to its nickel properties outside the Voisey’s Bay area. It recently entered into an option agreement to acquire a 100% interest in the Muscocho Lake nickel project in northwestern Quebec....
CANALASKA VENTURES $0.69 (Toronto symbol CVV; SI Rating: Start-up) (1-800-667-1870; www.canalaska.com; Shares outstanding: 107.5 million; Market cap: $74.2 million) holds seventeen 100%-owned uranium projects in the Athabasca Basin region of Saskatchewan. Since September 2004, the company has acquired one of the largest land positions in the region, totaling over 2.3 million acres. Drilling is now underway on five targets. Early results at the 100%-owned West MacArthur project, located immediately west of Cameco’s MacArthur River mine (the largest high-grade uranium mine in the world), have revealed promising mineralization. Mitsubishi Development Pty. Ltd. of Japan is acquiring a 50% interest in the West McArthur by spending $11 million in cash and exploration payments to CanAlaska over 3 1/2 years....