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
GANNETT CO. INC. $61 (New York symbol GCI; Conservative Growth Portfolio, Consumer sector; WSSF Rating: Above average) is one of the nation’s largest media companies. It publishes USA Today, 90 other daily newspapers and 1,000 non-daily newspapers. It also owns 23 TV stations. In the UK, it publishes 300 newspapers, including 17 dailies. Gannett’s earnings from continuing operations fell 1.8% in the third quarter of 2006, to $1.11 a share from $1.13 a year earlier. For the first time, the latest figure includes stock option costs, which totaled $0.03 a share. Revenue grew 2.7%, to $1.91 billion from $1.86 billion. The stock has moved down from $91 in 2004, due to investor concerns over ad competition from the Internet. The Internet provides great delivery efficiencies. But investors fail to appreciate the value of content that people want to read. Publishers are much better than Internet companies at creating this content. Now they are putting it on their web sites....
REITMANS (CANADA) LTD. $21.75 (Toronto symbol RET.A; SI Rating: Extra Risk) (514-384-1140; www.reitmans.com; Shares outstanding: 70.3 million; Market cap: $1.5 billion) is Canada’s largest specialty women’s wear retailer. It now has 919 stores in operation, consisting of 358 Reitmans, 164 Smart Set/Dalmys, 156 Penningtons, 39 RW & Co., 124 Addition Elle, 70 Thyme Maternity and 8 Cassis stores. All Reitmans stores are corporate owned. There are no franchise outlets. Reitmans continues to steadily increase its sales. Over the last five years, sales have grown at an annual rate of 11.4%, to $969.3 million from $566 million. In the three months ended October 28, 2006, Reitmans’ revenues rose 8.4%, to $258.6 million from $238.6 million. Earnings rose 21.6%, to $23.4 million or $0.33 a share, from $19.2 million or $0.28 a share....
AGERE SYSTEMS $19.25 (New York symbol AGR; SI Rating: Speculative) (www.agere.com; 610-712-1000; Shares outstanding: 167.7 million; Market cap: $3.2 billion) jumped in price recently after receiving a takeover offer from New York-listed LSI Logic Corporation. LSI is offering 2.16 of its shares for each share of Agere. LSI’s shares were trading for $10.56 a share when it first made the offer, which valued each Agere share at $22.81. However, LSI’s shares have since dropped, and based on today’s price of $9.09 a share for LSI, the offer is now worth $19.63 per Agere share. Agere makes computer chips for storage (35% of sales), mobile wireless (28%) and networking (37%). The company’s chips and software are used in a broad range of computing and communications applications, including cell phones, satellite radios, PCs, PDAs, hard disk drives and gaming devices, as well as networks....
AMERICAN WOODMARK $41.52 (Nasdaq symbol AMWD; SI Rating: Speculative) (540-665-9100; www.americanwoodmark.com; Shares outstanding: 15.7 million; Market cap: $650.2 million) is the third-largest maker of kitchen and bath cabinets in the U.S. The company offers more than 230 cabinet lines in a wide variety of designs, materials and finishes. It sells its products through a network of dealers and distributors and directly to home centers and major homebuilders. The company now operates 15 plants and 10 service centres across the U.S. In the three months ended October 31, 2006, revenues fell 1.7%, to $210.8 million from $214.5 million. However, earnings per share rose 54.1%, to $0.57 from $0.37. The lower revenues came from the company’s ongoing shift away from lower-profit products. The improved earnings were due to the shift to higher-profit products, and an improvement in profit margins as it continued to cut material and labor costs....
AUTODESK, INC. $41.06 (Nasdaq symbol ADSK; SI Rating: Average) (515-507-5000; www.autodesk.com; Shares outstanding: 230.0 million; Market cap: $9.4 billion) jumped recently after the company said it expects to report record third quarter sales of $457 million. That’s up 21% from sales of $378.3 million in the third quarter of 2005. Autodesk makes AutoCAD, the world’s top selling computer aided design program. About four million architects and engineers in over 100 countries use it to design and test new buildings and products. This business supplies nearly 90% of its revenue. The remainder comes from programs that filmmakers use to create special effects. Customer adoption of Autodesk’s 3D products is increasing, and customer demand for the company’s 2D software remains strong....
SWIFT TRANSPORTATION CO. $28.28 (Nasdaq symbol SWFT; SI Rating: Extra risk) (602-269-9700; www.swifttrans.com; Shares outstanding: 74.9 million; Market cap: $2.1 billion) has rejected the $29 a share buyout offer from its former chief executive, Jerry Moyes. He founded the company in 1966, and is the company’s largest shareholder, with a 39% interest. However, Moyes stated in his initial offer that he might be willing to offer more than $29 a share. Swift plans to enter discussions with Moyes to determine if his offer can be increased. Swift has also has begun talks with other unspecified potential buyers. We’ll say more as the takeover unfolds, but for now, Swift is still a hold.
METRO INC. $36.77 (Toronto symbol MRU.A; SI Rating: Extra Risk) (514-643-1055; www.metro.ca; Shares outstanding: 113.9 million; Market cap: $4.2 billion) has settled the two-week strike by the 315 employees at its Montreal dry grocery goods warehouse. The strike affected around 25% of its store network. The new contract will bring stability to the dry grocery distribution center for the next nine years, to 2015. Metro still must negotiate new agreements with two separate unions representing 10,000 employees in Ontario at 80 A&P, Ultra Food & Drug and Dominion stores and a distribution center. However, talks are now underway. Metro reported higher sales and earnings in the three months ended September 30, 2006....
SHERMAG INC. $2.32 (Toronto symbol SMG; SI Rating: Speculative) (819-566-1515; www.shermag.com; Shares outstanding: 13.3 million; Market cap: $31.0 million) makes high-quality residential furniture at factories in Quebec and New Brunswick. Shermag reported 11.5% lower sales in the three months ended September 29, 2006, to $42.5 million from $48.1 million. However, the company was able to cut its loss to $1.1 million or $0.09 a share, compared to a loss of $2.1 million or $0.16 a share a year earlier. Shermag has been able to cut costs. It’s also on track to meet its goal of shifting 35% of its manufacturing to Asia by the end of this year. Ultimately, the company plans to increase that to 50%....
Most junior oil and gas stocks are now trading near their lows for the year on investor worries that oil and natural gas prices will remain low, or even drop further. Oil now trades at around $61 U.S. a barrel, down from the record high of over $78 that it reached in July this year. Still, global demand for oil continues to rise. We think oil could fall as low as $50 next year. But over the next few years it could stay in a $40 to $80 range. Natural gas prices might follow a similar pattern, but with occasional periods of high volatility....
TAHERA DIAMOND CORP. $1.14 (Toronto symbol TAH; SI Rating: Start-up) (1-877-777- 2004; www.tahera.com; Shares outstanding: 156.3 million; Market cap: $178.2 million) has completed the sale of 30 million units to Teck Cominco at $1.00 per unit. The units are comprised of 30 million common shares and 22.1 million common share purchase warrants, exercisable at prices between $1.20 and $1.50 in 2007, 2008 and 2009. Teck will now hold a 16% interest in Tahera. That will increase to 24.9% if all the warrants are exercised. Teck will also nominate one member to Tahera’s board of directors, and have the right to maintain its percentage interest in Tahera’s common shares....