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
CELTIC MINERALS $0.35 (Toronto symbol CME; SI Rating: Start-up) (403-261-2890; www.celticminerals.com; Shares outstanding: 60.0 million; Market cap: $20.7 million) has agreed to acquire a 75% interest in the Colliers River copper project, near Conception Bay, Newfoundland. A diamond drill has been mobilized on the property and drilling is underway. Celtic has the right to earn a 75% interest over three years by incurring expenditures of $300,000 on the property, and by making payments to its partner totaling $125,000, plus a payment of 175,000 Celtic shares. Strong mineral showings were first discovered at Colliers River in 1858 in surface samples, at which time a small shaft was sunk. No work has been completed since then. Celtic Mineral’s main prospect is still its West Voisey’s Bay property, 12 kilometers southwest of Inco’s Voisey’s Bay nickel-copper-cobalt mine in Labrador. It’s a long way between the initial drilling phase Celtic is now at on both properties, and the commercial production phase when it begins making money. Still, the stock has speculative appeal for its landholdings in regions with proven potential....
ACCORD FINANCIAL CORP. $7.90 (Toronto symbol ACD; SI Rating: Speculative) (416-961-0007; www.accordfinancial.com; Shares outstanding: 9.4 million; Market cap: $74.3 million) is in the factoring business in Canada and the U.S. Factoring is the purchase of a company’s accounts receivable at a discount. Accord profits by collecting the receivables. Accord can also handle a company’s credit-checking, record-keeping and collections. Most of its customers fail to meet bank lending standards. In Canada, the company focuses on textiles, footwear and other “soft goods” industries. In the U.S. it services a wider range of industries. Besides factoring, Accord and its subsidiaries also offer asset-based lending services. In the three months ended September 30, 2006, Accord’s revenues rose 4.5%, to $7 million from $6.7 million. Earnings rose 45.6%, to $1.5 million or $0.15 a share, from $1 million or $0.10 a share. Cash flow rose 31.6%, to $2.4 million or $0.25 a share, from $1.8 million or $0.18 a share. Accord’s shares yield 2.8%....
INDIGO BOOKS & MUSIC INC. $15.05 (Toronto symbol IDG; SI Rating: Speculative) (416-646-8965; www.chapters.indigo.ca; Shares outstanding: 24.4 million; Market cap: $367.2 million) reported higher earnings in its fiscal third quarter ended December 31, 2006. Earnings rose 3.1%, to $41 million or $1.68 a share, from $39.8 million or $1.65 a share. Without one-time items, earnings would have risen 7.2%. The third quarter includes Christmas and it’s the busiest period for the company. Indigo typically loses money in the other three quarters. Revenues rose 3.4%, to $320.5 million from $309.9 million. The company had sales growth in all areas, including superstores, small-format stores and its on-line retail operations. Indigo is still a buy.
GABRIEL RESOURCES $4.88 (Toronto symbol GBU; SI Rating: Speculative) (416- 955-9200; www.gabrielresources.com; Shares outstanding: 210.9 million; Market cap: $1.0 billion) reached a new high of $5.45 recently after it received the official list of questions from the Romanian Ministry of Environment and Water Management relating to its proposed Rosia Montana gold project....
20-20 TECHNOLOGIES INC. $7.00 (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. One example of the company’s software is 20-20 Virtual Studio. This product lets consumers select, position and move kitchen, bath, living room and bedroom furniture and decorative accessories at will, while choosing from a wide range of product combinations, colors and finishes. The consumer chooses design components from the dealer’s catalog offerings, and then views self-created rooms and decorations in 2D and 3D from any angle on a 360-degree axis. The software then automatically generates price and shopping lists for review....
FIRSTSERVICE CORP. $29.58 (Toronto symbol FSV; SI Rating: Extra Risk) (416-960- 9500; www.firstservice.com; Shares outstanding: 28.6 million; Market cap: $846.0 million) reports 26.3% higher revenues in its third quarter ended December 31, 2006, to $374.8 million from $296.7 million a year earlier. (All figures except share price in U.S. dollars.) Earnings per share rose 30.4%, to $0.30 from $0.23. FirstService now expects earnings in the fiscal year ending March 31, 2007 in the range of $1.27 to $1.32 U.S. a share. That’s a price/earnings ratio of less than 20.0. FirstService operates in the rapidly growing service sector, providing services in the following areas: commercial real estate; residential property management; integrated security services; and property improvement services. It continues to expand profitably through acquisitions and internal growth. Both avenues still offer lots of potential for expansion in the fragmented service sector....
TEMPUR-PEDIC $26 (New York symbol TPX; SI Rating: Speculative)(800-878-8889; www.tempurpedic.com; Shares outstanding: 83 million; Market cap: $2.2 billion) makes and distributes Swedish Mattresses and Neck Pillows made from its proprietary Tempur pressure-relieving material. The material (which the company refers to as visco-elastic) conforms to the body to provide support and help alleviate pressure points. Products are currently sold in 60 countries. In the three months ended December 31, 2006, sales rose 19%, to $256.6 million from $215.6 million. Earnings rose slightly, to $30.5 million from $30.4 million. However, earnings per share rose 15.7% in the latest quarter, to $0.37 from $0.32, on fewer shares outstanding due to share buybacks. Tempur-Pedic is introducing new mattresses this year to boost sales. The BellaSonna Bed will add a TFlex support base featuring hundreds of individually adjusting cylinders made from a new form of latex. The new SymphonyBed has two layers of Tempur material, plus a lower layer Dual Airflow System which promotes air circulation within the mattress for maximum comfort and responsiveness....
It was great to see the Saturday, February 3, 2007 Globe & Mail Report on Business ranked Stock Pickers Digest as Canada’s top investor newsletter in 2006. (The Successful Investor, our flagship newsletter for less aggressive investors, was #3 in the Globe’s analysis.) We achieved this ranking despite a couple of formidable obstacles that we faced this past year. First, we advise Canadians to invest up to 30% or so of their money in U.S. stocks. However, the U.S. dollar moved down in relation to the Canadian dollar in the first half of 2006. This hurt our U.S. recommendations and detracted from our overall results. Second, the resources sector provided much of the market’s 2006 gains. Here too, diversification weighed on our results....
GREY ISLAND SYSTEMS INTERNATIONAL $0.58 (Toronto symbol GIS; SI Rating: Speculative) (877-434-4844; www.interfleet.com; Shares outstanding: 66.2 million; Market cap: $38.4 million) is an Internet-based automated vehicle location and mobile data services provider for the fleet management market. Grey Island’s InterFleet product features a live map display of entire fleets of vehicles. The company is now Canada’s largest automated vehicle location provider for emergency medical services. In 2006, InterFleet won contracts with the Long Island Rail Road, the City of Tallahassee, Florida and New York City’s fire department. Grey Island’s NextBus technology uses GPS and wireless communications to predict arrival times for riders. Times are distributed to riders by digital signs at transit stops, and at home via the Internet, through cell phones or by telephone. NextBus is currently in use by 40 transit systems, including those in San Francisco, Washington D.C., and Guelph, Ontario. Last year, Paul Christie, former Chairman of the Toronto Transit Commission, joined Grey Island’s board of directors....
WENDY’S INTERNATIONAL INC. $33.29, New York symbol WEN, plans to buy back up to $300 million worth of its stock in the next few weeks, as part of a plan which it hopes will enhance stockholder value. It had $457.6 million ($4.78 a share) in cash at the end of 2006. Share buybacks boost per share earnings and increase the proportionate ownership of the remaining stockholders. But Wendy’s stock will make little progress until it improves the performance of its restaurants. We now feel Wendy’s holders should sell. CONAGRA FOODS INC. $25.53, New York symbol CAG, has recalled some of its Peter Pan peanut butter due to possible salmonella contamination. This will cut its earnings by about $0.07 a share; ConAgra expects to earn between $1.28 a share and $1.33 a share in its fiscal year ending May 31, 2007, excluding non-recurring items....