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
TIM HORTONS $34.59 (Toronto symbol THI; SI Rating: Extra Risk) (905-845-6511; www.timshortons.com; Shares outstanding: 190.5 million; Market cap: $6.6 billion) has mostly focused on expanding in North America so far, apart from an outlet for the Canadian Forces in Afghanistan. However, it is developing a serious presence in Ireland. SPAR Ireland, the leading convenience food retailer in Ireland with over 440 franchised locations, has just opened its 50th Tim Hortons coffee and donut self-serve kiosk. SPAR now plans to make the concept available to SPAR storeowners throughout Ireland over the next few years. The self-serve kiosks, featuring Tim Hortons coffee and a selection of donuts, were tested and introduced over the past few months. Cuisine de France is managing the rollout, under license from Tim Hortons. Independent SPAR retailers operate the kiosks. Cuisine de France, a leading provider of lifestyle foods in Ireland, is a subsidiary of IAWS Group plc. IAWS is a major food and agri-business group with operations in Ireland, Great Britain, continental Europe, Canada and the United States....
FAIR ISAAC CORPORATION $35.39 (New York symbol FIC; SI Rating: Average) (415- 472-2211; www.fairisaac.com; Shares outstanding: 57.4 million; Market cap: $2.0 billion) continues to put in place changes to boost its sales and profits. The company has reorganized its sales-force into teams based on clients instead of product lines. This should help it develop better relationships with clients, and encourage them to buy more of its products. The company is also selling off low-profit or non-core operations where it lacks a competitive advantage. This includes the recent sale of part of its mortgage-related operations. Fair Isaac is also doing a good job of competing with a new credit scoring system created by three credit agencies....
GARMIN $55.76 (Nasdaq symbol GRMN; SI Rating: Speculative) (913-397-8200; www.garmin.com; Shares outstanding: 216.3 million; Market cap: $12.1 billion) makes portable and fixed-mount GPS products in four major areas: automotive and mobile, outdoor and fitness, marine and aviation. Its products include both portable and dash-mounted navigation systems for automobiles, cell phones, sea craft and aircraft. Consumer products account for 80% of Garmin’s sales. It sells these products through 3,000 independent dealers and distributors in 100 countries. They include major U.S. retailers Wal-Mart, Target, Bass Pro Shops, Boaters World and Best Buy. The company also sells products to the aviation industry. Garmin’s sales rose 52.7% in the three months ended March 31, 2007, to $492.2 million from $322.3 million. Earnings rose 59.8%, to $139.9 million or $0.65 a share from $87.5 million or $0.40. Garmin has cash of $573.1 million or $2.65 a share, and no long term debt....
NOVATEL $37.07 (Nasdaq symbol NGPS; SI Rating: Speculative) (403-295-4500; www.novatel.com; Shares outstanding: 8.6 million; Market cap: $317.5 million) makes GPS products, such as receivers and antennas, for customers to use in products they make for the aviation, surveying, mapping, mining, agriculture, marine and defense markets. NovAtel’s compact products provide sub-centimetre-level accuracy. They also work under adverse outdoor conditions. NovAtel’s sales rose 10.8% in the three months ended March 31, 2007, to $17.5 million from $15.8 million. Earnings per share rose 6%, to $0.53 from $0.50. The company holds cash of $46.8 million or $5.46 a share, and has no debt. NovAtel spends 19% of sales on research. The improved results came mostly from 46% revenue growth in sales of a GPS product for surveyors developed by Point Inc., NovAtel’s joint venture with Sokkia Co. Growth in the quarter also came from higher sales to the precision agriculture market and greater shipments of product to Asia....
We’ve had great success with our GPS picks over the last few years. These companies have continued to find new uses for GPS, including navigation maps on cell phones, devices that let farmers more accurately and even remotely work their fields, training devices for runners to measure distance and times and antitheft devices for cars and other property. The Global Positioning System (GPS) is a 24 satellite navigation system run by the U.S. government that lets users precisely determine their geographic location and speed anywhere in the world. The European Union is now in the later stages of developing its own Global Navigation Satellite System (GNSS). It expects this system, called Galileo, to be fully operable in 2010 to 2012, with up to 30 satellites orbiting the earth....
LINAMAR CORP. $19.59 (Toronto symbol LNR; SI Rating: Speculative) (519-836-7550; www.linamar.ca; Shares outstanding: 69.8 million; Market cap: $1.4 billion) is using higher sales of its Skyjack self-propelled, scissor-type elevating work platforms to offset lower industry demand for car and truck parts and systems. Sales fell slightly in the three months ended March 31, to $579.4 million from $583.3 million a year earlier. However, despite the drop in sales, earnings per share rose 5.6%, to $0.38 from $0.36. The company was able to cut costs. Linamar is positioned to benefit from the increasing sophistication and technological content of cars and trucks. A recovery in North American car production will just add to its prospects....
DUNDEE REIT $40.80 (Toronto symbol D.UN; SI Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 40.8 million; Market cap: $1.7 billion) owns and operates 18.4 million square feet of office, industrial and retail properties. It now holds 110 office buildings and 126 industrial properties. The company focuses on mid-sized urban and suburban office and industrial properties. It cuts risk by concentrating on properties in Toronto, Montreal, Calgary, Edmonton and Ottawa. Dundee’s revenues were $87.2 million in the three months ended March 31, 2007, up 38.4% from $63 million a year earlier. The best measure of operating performance for a real estate company is cash flow. Dundee’s cash flow per share in the latest quarter was $0.56, up 9.8% from $0.51. It pays a distribution of $0.183 a month for an annual yield of 5.4%....
LEON’S FURNITURE $59 (Toronto symbol LNF; SI Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 17.7 million; Market cap: $1.0 billion) has built new warehouse showrooms and renovated its existing stores to profit from the boom in residential construction over the last few years. But even with housing sales now in a slowdown, the company will keep prospering because new homeowners tend to keep buying home furnishings in the first few years of ownership. Leon’s has built its chain of over 60 furniture outlets on its three main advantages: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; and superior after-sales service. Leon’s aggressively promotes its cross-Canada stores with TV, radio and print ads. We’ve recommended Leon’s a number of times as our Pick of the Month. The stock’s price has almost tripled since we first recommended it at $21 in July, 1999....
AVAYA INC. $16.08, New York symbol AV, moved up by more than $2 this week on rumors that it’s talking with other telecommunication equipment firms about a merger. It may also be negotiating with private investors. Avaya has no controlling stockholder, and its patents and strong position in the fast-growing Internet-based phone network market should make it an attractive takeover target. Avaya is debt free and has cash of $1.84 a share, which adds to its appeal. Avaya is now a hold....
ALLTEL CORP. $68.60, New York symbol AT, has accepted a $71.50-a-share takeover offer from private investors. The stock is trading below the offer price, which means the likelihood of a better offer is low. However, Alltel has no controlling stockholder, so a competing bid is possible. Alltel is now a hold. MICROSOFT CORP. $30.48, Nasdaq symbol MSFT, has agreed to pay $6 billion for aQuantive, Inc., a publicly traded firm that helps companies improve the effectiveness of their online advertising. Microsoft has roughly $28 billion (roughly $3.00 a share) in cash, so it can easily afford the purchase price....