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
RUBY TUESDAY, INC. $27.99 (New York symbol RI; SI Rating: Speculative) (865-379- 5700; www.rubytuesday.com; Shares outstanding: 54.3 million; Market cap: $1.5 billion) has changed its stock symbol to “RT” from “RI”. Revenue rose 11.6% in the three months ended March 6, to $377.9 million from $338.6 million. Earnings per share fell 2%, to $0.49 from $0.50. Excluding one-time items, per-share earnings rose 14%, to $0.57 from $0.50. Ruby Tuesday expects sales to slow somewhat in the current quarter, mainly due to unseasonably cold weather, weaker economic growth and discount pricing by almost all of its competitors. Earnings will likely be in the range of $0.46 to $0.48 a share. Ruby Tuesday operates in the competitive and fickle casual dining segment. But the company’s remodeling program, plus improvements to its menu, service and advertising should help its sales keep rising....
IMPERIAL METALS $12.50 (Toronto symbol III; SI Rating: Speculative) (604-669-8959; www.imperialmetals.com; Shares outstanding: 30.8 million; Market cap: $384.7 million) is a Vancouver-based mining company that explores for and produces base and precious metals. Its producing assets are a 100% interest in the Mount Polley open pit copper/gold mine in central British Columbia, plus a 50% interest in the Huckleberry open pit copper/molybdenum mine in west central B.C. In 2006, Imperial Metal’s share of production from the two mines was 90.9 million pounds of copper, 42,800 ounces of gold, 546,000 ounces of silver and 153,000 pounds of molybdenum. The Mount Polley property covers over 19,000 hectares. Mount Polley’s current mine life is six years. Total proven and probable reserves are 476 million pounds of copper and 517,000 ounces of gold. Exploration and drilling is ongoing, with 123 diamond drill holes completed in 2006....
IVERNIA INC. $1.20 (Toronto symbol IVW; SI Rating: Speculative)(416-867-9298; www.ivernia.com; Shares outstanding: 134.7 million; Market cap: $161.7 million) has now temporarily closed its 100% owned Magellan mine in Australia. Meanwhile, Ivernia is seeking approval to ship the lead concentrate in enclosed and double-sealed containers. These will be transported from the mine site, through the port, and then on to customers in Asia. The company anticipates the approval process taking three to four months. Ivernai produces lead at the mine and then trucks the ore concentrates 700 kilometers across the Outback, to the town of Esperance, on the south coast of Western Australia. The company has had to suspend production pending the outcome of government investigations into recent bird fatalities at the Port of Esperance. Up to 4,000 birds died in Esperance between early December and January. Tests on four birds showed that two died of lead poisoning. Tests of port workers and Esperance residents showed most had blood lead levels well below recommended guidelines. However, testing of the lead content of some rainwater tanks showed lead content above acceptable levels. The investigation continues....
Investing in diamond exploration stocks is risky. It’s a long way between the exploration phase and the commercial production phase when they begin to produce diamonds for sale and possibly start making money. There’s often a long lag between signs of progress, and share prices can drift down in the meantime. Sometimes news is negative, and share prices fall sharply. Still, here are three promising diamond exploration stocks. All have speculative appeal, but they are buys only for highly aggressive investors. SHORE GOLD $5.86 (Toronto symbol SGF; SI Rating: Start-up) (306-664-2202; www.shoregold.com; Shares outstanding: 177.2 million; Market cap: $1.0 billion) owns 100% of the Star diamond project in the Fort a la Corne area of northern Saskatchewan, an area that hosts one of the most extensive kimberlite fields in the world. The Star project contains a diamond-bearing kimberlite, estimated in the 500 million tonne range. Bulk sampling has already returned high carat-grades of diamonds....
GRAND PETROLEUM $3.63 (Toronto symbol GPP; SI Rating: Speculative) (403-231- 8400; www.grandpetroleum.com; Shares outstanding: 26.3 million; Market cap: $95.4 million) explores for and develops oil and natural gas in central Alberta. It has also started drilling in southeast Saskatchewan. In the three months ended December 31, 2006, Grand estimates that it generated cash flow per share of $0.22, down by one third from $0.33 a year earlier. The drop was mostly due to lower oil and gas prices. Grand produced an average of 3,274 barrels of oil equivalent per day in the fourth quarter, up 18.8% from 2,755 barrels in the third quarter. Production is weighted 67% toward oil and 33% to natural gas....
ZARGON ENERGY TRUST $27 (Toronto symbol ZAR.UN; SI Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 16.9 million; Market cap: $457.4 million) has oil and gas production assets in Alberta, B.C., Manitoba and Saskatchewan. Zargon’s production is weighted approximately 55% toward natural gas and 45% to oil. In the three months ended December 31, 2006, Zargon reported cash flow per unit of $0.98, down 30% from $1.40 a year earlier. Production fell 3.3%, to 8,366 barrels of oil equivalent per day, from 8,651 barrels. The lower cash flow came mostly from lower oil and natural gas prices. Zargon now trades at around 6.9 times cash flow. The company’s debt of $30 million is equal to just 18% of shareholders’ equity....
When you think about putting money in any investment that has yet to establish a history of profit, you need to keep one key fact in mind: It’s far easier to create an intriguing investment opportunity than a successful, self-perpetuating business. Mind you, both tasks take some ingenuity. Both call for an injection of capital and the application of various professional services. However, all businesses start out as investments. But few investments turn into self-perpetuating (that is, profitable) businesses. It’s particularly crucial to keep this fact in mind if you are thinking about investing in a hot penny mining area....
BROADRIDGE FINANCIAL SOLUTIONS $20.68 (New York symbol BR: SI Rating: Extra risk) (201-714-3000; www.broadridge.com; Shares outstanding: 138.7 million; Market cap: $2.9 million) specializes in three areas of service to the investment industry: investor communications; securities processing; and transaction clearing, trade settlements and other back office operations. Clients include 250 banks, 500 mutual fund families and 5,000 publicly listed companies. Broadridge began trading on April 2, 2007 after it was distributed as a dividend or spinoff to shareholders of New York-listed ADP. Broadridge has built its business over 40 years as a subsidiary of accounting industry leader ADP. As well, spinoffs often beat the average for several years after investors receive them from the parent. The company distributes over one billion investor communications each year, including investor account statements, trade confirmations and tax statements. Components of its securities processing services are used by seven of the top 10 U.S. broker-dealers. Broadbridge mails and processes over 70% of all proxy votes. Its fixed income business processes trades with a settlement value of $2 trillion a day....
FAIR ISAAC CORP. $36.31, New York symbol FIC, fell about 10% after the company cut its earnings and revenue forecasts for the rest of the fiscal year ending September 30. The company now expects to earn between $1.55 and $1.65 a share, on revenue of $795 million to $805 million. Fair Isaac had previously forecast 2007 earnings of $2.15 a share on revenue of $870 million. The stock now trades at 23.0 times the midpoint of its new fiscal 2007 profit range. But Fair Isaac continues to spend close to 10% of its revenue of $14 a share on research, so it’s more profitable than it appears. The company did not immediately provide a reason for the lower forecasts, which helped fuel the drop. But it seems to be having trouble reorganizing its salesforce into teams that serve clients, rather than specializing in product lines. Fair Isaac feels this will help it develop better relationships with its clients, and spur them to buy more of its products....
ALCOA INC. $35.12, New York symbol AA, earned $0.79 a share in the first quarter of 2007, up 12.9% from $0.70 a year earlier. These figures exclude restructuring costs. Revenue rose 11.3%, to $7.9 billion from $7.1 billion, due to higher aluminum prices and sales of aerospace parts and building materials. The latest earnings exceeded earlier forecasts of $0.76 a share, and the stock gained 2%. Earnings should continue to improve as the company realizes more of the benefits from its recent restructurings. New projects in Iceland and Brazil should also help Alcoa take advantage of strong global demand for aluminum. Alcoa is a buy....