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.
Read More
Close
Growth Stocks Library Archives
Our recommendations in software stocks have delivered huge gains in the past few years. But many now face growing competition from free software on the Internet, or they trade at high p/e’s. Computer makers are also demanding lower prices for pre-installed programs to keep the costs of new computers down. We still hold a high opinion of these top software makers, but we advise against new buying right now. AUTODESK INC. $38 (Nasdaq symbol ADSK; WSSF Rating: Average) makes AutoCAD, the world’s top selling computer aided design program. About 4 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....
Here are two general rules that have paid off again and again over the years: First, new stock issues tend to produce below-average results for investors; second, spin-offs tend to produce above-average results. This is due to human nature. New issues come to market when it’s a good time for the company or its insiders to sell. That’s not likely to be a good time for you to buy, regardless of any mitigating factors. The reverse is true of spin-offs (when a company sets up a division as a separate entity and hands out stock in it to its own investors). Companies create spin-offs when they are likely to pay off for their own investors....
Investors often ask how long they should hang on to a disappointing stock. There is no single answer, but you should never base any investment decision solely on a rise or fall in the price of a stock. Stock price changes usually depend on a variety of factors, including economic, industry and company-specific issues. Also remember that the stock market anticipates things, and no trend lasts forever. For instance, some industrial manufacturers have suffered due to rising oil prices. But oil will eventually come down. If a company remains profitable despite a sharp rise in a key input, think how much better it will do when the price of that input subsides....
Searchable versions of your newsletter are not yet available for the dates you’ve selected. In the meantime, we have posted complete issues, in PDF format, for your convenience. Best regards, TSI Network
Searchable versions of your newsletter are not yet available for the dates you’ve selected. In the meantime, we have posted complete issues, in PDF format, for your convenience. Best regards, TSI Network
MCCORMICK & CO. INC. $33 (New York symbol MKC) will acquire the 49% of Dessert Products International (DPI) that it does not already own in exchange for its half of another joint venture company. DPI makes dessert toppings for the European market, and owning 100% of it should make it easier for McCormick to expand this business. But McCormick’s restructuring will slow its profit growth in 2006. Hold. T. ROWE PRICE GROUP INC. $77 (Nasdaq symbol TROW) has raised its quarterly dividend 21.7%, from $0.23 a share to $0.28. The new annual rate of $1.12 yields 1.5%. However, its p/e of 21 increases the risk of a sudden drop if the company’s earnings fail to match expectations. Hold. SNAP-ON INC. $39 (New York symbol SNA) raised its quarterly dividend 8.0%, from $0.25 a share to $0.27. The new annual rate of $1.08 yields 2.8%. The growing complexity of new cars, particularly hybrids, should spur more demand for Snap-On’s tools and equipment. Buy....
BECKMAN COULTER INC. $55 (New York symbol BEC; WSSF Rating: Average) is a long-time favorite of ours due to its rare combination of strong growth at moderate risk. It also operates in a growing field, and every system it sells gives it a new long-term supplies customer. It should also gain from an increased emphasis on early detection and treatment of diseases. Beckman makes lab analysis equipment for hospitals, clinics and medical research firms. These machines detect and measure substances in blood and other body fluids. Beckman has installed more than 200,000 of its systems in about 130 countries. The United States accounts for just over half of its revenue. Revenue rose steadily, from $2.0 billion in 2001 to $2.44 billion in 2005. Income before non-recurring items grew from $2.21 a share (total $141.5 million) in 2001 to $3.21 a share ($210.9 million) in 2004....
ADVANCED MICRO DEVICES INC. $41 (New York symbol AMD; WSSF Rating: Extra risk) is the world’s second-largest maker of computer processor chips after Intel Corp. The company also makes flash memory chips through Spansion Inc., a joint venture with Japan’s Fujitsu Ltd. Flash chips retain data in mobile phones and other devices, even when a user turns off the power. However, overcapacity in the flash memory industry has hurt Spansion’s earnings in the past few years. That’s why AMD and Fujitsu sold Spansion shares to the public in December 2005. The sale cut AMD’s stake in Spansion, from 60% to 37.9%. AMD may hand out its remaining Spansion shares to its own stockholders in the next year or two. The Spansion sale generated a one-time charge of $110 million. If you exclude all unusual items, AMD earned $0.45 a share (total $205 million) in the fourth quarter of 2005. It lost $0.08 a share ($30 million) a year earlier. Revenue rose 38.5%, to $1.8 billion from $1.3 billion....
INTEL CORP. $20 (Nasdaq symbol INTC; WSSF Rating: Above average) is the world’s largest supplier of computer chips, with roughly 80% of the market. That figure could rise in the next few months, as Apple Computer begins using Intel chips to power its new line of Macintosh computers. Intel’s profit in the three months ended December 31, 2005 rose 21.2%, to $0.40 a share (total $2.4 billion) from $0.33 a share ($2.1 billion) a year earlier. Sales grew 6.3%, to $10.2 billion from $9.6 billion. However, these figures fell short of earlier forecasts, mainly due to weaker demand for new computers over the Christmas shopping season. Shortages of certain parts also hindered Intel’s ability to keep up with demand, which let rival AMD improve its market share. The news cut Intel’s stock by 10%, and it now trades at 15.9 times its forecast 2006 profit of $1.26 a share. We feel that these are short-term setbacks, and that Intel will bounce back. The $0.40 dividend yields 2.0%....
When a company sets up one of its subsidiaries or divisions as a separate company and hands the stock out to its investors as a special dividend, it tends to unlock hidden value. Over time, the combined value of the post-spinoff parent and spun-off company usually exceeds the value of the parent before the spin-off. Mind you, this is a general tendency, not a guarantee of continued profit. Nor does it provide protection against the effects of a bad market. During the Internet boom of a few years ago, for instance, many tech stocks spun off their Internet divisions. When that boom turned to bust, these Internet spin-offs plunged with the rest of the sector. Here is our updated analysis of spin-offs carried out by stocks we recommended. All three paid off and helped unlock some of the hidden value in the parent company. But not all of them are buys....