What kind of stocks should you be putting in your TFSA to snowball it up to $1 million over the course of decades? That’s a question that many Canadian investors have been asking since the TFSA’s inception, and unfortunately, there isn’t a single “one-size-fits-all” answer for everyone, since it really depends on your individual appetite for risk.
Personally, I’d recommend keeping your higher-risk, speculative activities outside a TFSA, since you can’t offset gains from any capital losses you may incur. Sure, you may grow your wealth at a faster rate with riskier securities, but for the average investor, it’s a much better idea to take a page out of Warren Buffett’s playbook by buying the stocks of forever businesses that have ridiculously wide moats — preferably filled with water and alligators!
In the age of technological innovations, many businesses across various industries are experiencing “moat erosion,” in that their once wide moats are becoming narrower due to rises in disruption from firms that are leveraging technology to make it harder for incumbents to hold their own. These are the stocks you’ll want to put at the core of your TFSA, while you watch it grow like a snowball rolling down the side of a snow-covered hill.
Without further ado, here are the stocks:
Canadian National Railway Company (TSX:CNR)(NYSE:CNI)
Railways are the widest-moat businesses out there. That’s why they’re a core holding for so many legendary investors, such as Warren Buffett and Bill Gates. The rails have been around for countless decades, and they’re going to be around for many more, since the barriers of entry make it essentially impossible for a new competitor to enter and thrive.
As tech improves, the rails will prosper as more duties become automated, while the rails become safer and more efficient. CN Rail is arguably at the forefront of rail tech with intriguing new innovations such as CaniPux, which aims to solve many of the issues that arise from the transportation of heavy crude.
NAFTA or no NAFTA, CN Rail is a strong buy on any dips, especially for longer-term investors who can think beyond the shorter-term issues that have been dictating the recent negative movements in share price. I’d buy the stock today with the intention of buying more should Donald Trump actually rip up NAFTA because in the grander scheme of things, this is just a temporary issue that’ll pass in time.
Alimentation Couche-Tard Inc. (TSX:ATD.B)
With over 12,000 stores across the world, Couche-Tard is a convenience store behemoth that’s eating up its competition and digesting major synergies from across the board. Although the stock has slowed down in recent years, there are still many years of earnings growth that’ll be realized through M&A, despite the company’s massive market cap.
With stores located at the core of many urban Canadian areas, Couche-Tard has a unique and strategic advantage that makes it one of the most practical potential sellers of cannabis once regulators become more open to alternative means of distribution.
At just 22.21 times trailing earnings, Couche-Tard is simply too big a bargain to pass up, and if the company gets the green light for cannabis sales, shares could easily pop, but don’t hold your breath, as this is an extremely long-term hold.
Stay hungry. Stay Foolish.
