Tax-free savings accounts shield your capital gains from taxes. With that in mind, I believe every investor should try to focus on growth stocks to maximize their tax-free returns over time — and there’s no better hunting ground for growth than the technology sector.
Here are the top three tech stocks that deserve a spot on every Canadian TFSA investor’s watch list.
Lightspeed
The biggest initial public offering this year, Lightspeed POS (TSX: LSPD), has also been one of the country’s top performers so far. The stock is up a whopping 133% since the stock was listed in March.
Lightspeed provides point-of-sale (POS) software for retailers and restaurant owners worldwide. This is a business with intense competition, but tremendous room for growth. The global POS market is estimated to be worth US$108 billion within a few years.
Lightspeed has been scaling its business up rapidly. Revenue expanded by a third this past fiscal year and the company’s gross margin expanded to a jaw-dropping 69.59%. Meanwhile, the balance sheet is in top-notch condition, with minimal debt and $207 million in cash.
Growth-seeking TFSA investors cannot afford to ignore this rising star.
WELL Health
Hong Kong’s richest man Li Ka-shing built his empire through savvy investments in real estate, so when this property mogul took a massive stake in a Canadian start-up last year, it caught my attention. The start-up he picked is focused on a very specific type of real estate: clinics.
Ka-shing’s investment vehicle now owns a hefty stake in Vancouver-based WELL Health Technologies (TSXV:WELL), which has defined itself as the “WeWork for doctors.” The company owns a network of clinics across the region and offers doctors a technology platform that cuts out the paperwork from healthcare.
Over the past three years, the stock has returned over ten times its initial value. At its current rate of expansion, client acquisition and clinic launches, the stock could very well double in three years or less.
The healthcare industry is ripe for disruption, and if WELL Health can deliver that through data-driven digital tools and tech-enabled clinics, early investors could be in for a massive windfall.
Sierra Wireless
Over the past two decades, Sierra Wireless (TSX: SW)(NASDAQ: SWIR) has been at the forefront of the mobile internet revolution through multiple iterations. Its tiny modules have helped connect smart devices to the internet as standards evolved from 2G to 4G LTE.
Now, it’s at the cutting-edge again with the industry’s first 5G module. This flagship product puts Sierra at the intersection of two emerging tech trends — the internet-of-things (IoT) and faster mobile connectivity.
IoT alone is an industry that could be worth half a trillion dollars ($561 billion) by 2022, according to research firm Markets and Markets. Meanwhile, the emerging market for 5G infrastructure could be worth a quarter of a trillion ($277 billion) by 2025. That’s plenty of room to grow for a company that is currently worth $516 million.
Revenue and net profit fell short of expectations in the most recent quarter, which suppressed the stock price. This could be the perfect opportunity for investors who are confident that the Vancouver-based firm can achieve its $1 billion revenue target over the long-term.
