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TFSA Investors: Buy These Cash Cows on Weakness for Explosive Long-Term Returns

These days, I’m always looking for attractive entry points to add certain stocks to my TFSA, because I want to maximize my TFSA contributions without overpaying for my additions.

The markets are down again today, which leads me to think more about the stocks that I want to be ready to pounce on if this weakness persists. When general market weakness occurs, it always brings with it a light at the end of the tunnel.

The light is in the many stocks that we will uncover trading at ridiculously low valuations.

Market weakness hits all stocks, even those that have stable and positive long-term fundamentals — stocks such as Waste Connections (TSX:WCN)(NYSE:WCN) and Badger Daylighting (TSX:BAD). These stocks are cash cows that have stable, strong businesses that will carry them higher at the end of the day.

So, be patient, buy them on dips, and sail off into the sunset secure in the knowledge that you have scooped up a couple of high-quality stocks at bargain prices.

Waste Connections

Waste Connections stock has gone in only one direction … UP!

If you are like me, expecting more weakness to hit the markets, then this is one to put on your “buy-on-weakness” list.

In the last five years, revenue has increased 145%, net income has increased 332%, and free cash flow has increased 437%.

Waste Connections is in the solid waste business, the third-largest North American solid waste company, with a clean, low-debt balance sheet, and cash, cash and more cash, so it is well positioned to continue to be a consolidator.

In the last five years, Waste Connections has seen its free cash flow grow at a compound annual growth rate of 40%. If that doesn’t get us interested, I don’t know what would.

The biggest problem this company has is how to use this cash … a great problem to have.

So, going forward, we will see acquisitions, more dividend increases, and, as the company continues to consolidate this fragmented industry, more efficiencies and returning of cash to shareholders.

Badger Daylighting

Badger has also risen dramatically, and for good reason.

Infrastructure investment continues strong, and with exposure to a diversified list of clients such as stable utility, energy, transportation, and construction clients, to name a few, Badger’s non-destructive excavation process will be in high demand for years to come.

Badger has enjoyed a 15.5% 10-year compound annual revenue growth rate, EBITDA margins of between 25% and 30%, and continues to benefit from a solid balance sheet, thus giving it the flexibility to continue to grow organically and via acquisitions.

Final thoughts

Wait for general market weakness and pull the trigger to buy these two cash-cow stocks for strong long-term returns for your TFSA.

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Fool contributor Karen Thomas has no position in any of the stocks mentioned. Badger Daylighting is a recommendation of Stock Advisor Canada.

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