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TFSA Wealth: 3 Top Small-Cap Stocks to Buy Today

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Investing success in a Tax-Free Savings Account (TFSA) is very gratifying. There are few things better than racking up tax-free gains. A small-cap stock is generally a company with a market capitalization between $300 million and $2 billion. Small caps have historically outperformed large caps. However, these stocks also tend to be more volatile. Today, I want to look at three small-cap stocks that are worth stashing in a TFSA for the long haul.

TFSA investors: This small-cap stock is on a roll in 2020

Goodfood Market (TSX:FOOD) was recently pinpointed by Fool contributor Vishesh Raisinghani as a stock that could 10x its value in 10 years. This online grocery company is entering an exciting phase. Shares of this small cap have soared 119% in 2020 as of close on July 23.

The company released its third-quarter fiscal 2020 results on July 8. It achieved a profit for the first time in its history, as net earnings hit $2.8 million. Revenue climbed 74% year over year to $86.6 million while gross profit increased 77% to $24.9 million. The COVID-19 pandemic has had a positive impact on its business, accelerating the shift to e-commerce grocery shopping.

TFSA investors should look to get in on the e-commerce grocery trend in the years ahead. Goodfood Market is a great stock to start with on the TSX.

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Don’t sleep on this super healthcare stock right now

Savaria (TSX:SIS) designs, engineers, and manufactures products for personal mobility in Canada and around the world. Back in June, I’d explained why the stock was worth holding for decades. The global personal mobility market is well positioned for big growth in the years to come largely on the back of aging demographics. Savaria is the perfect small-cap stock for a TFSA.

Shares of Savaria have dropped 1.7% in 2020 so far. The stock is still up 13% year over year. Savaria provided a preview of its second-quarter 2020 results on July 15. Adjusted EBITDA was estimated at $14.5 million, which would represent a 2% increase from Q2 2019. In the year-to-date period, revenue will have dropped 4.7% from the prior year to $173 million.

The stock last had a price-to-earnings ratio of 24 and a price-to-book value of 2.4. This puts Savaria in good value territory relative to industry peers. TFSA investors can also rely on its monthly dividend of $0.0383 per share, which represents a 3.4% yield.

One more small-cap stock to add to your TFSA

Lucara Diamond is a Vancouver-based diamond miner with a major presence in Africa. Its shares have dropped 30% in 2020 so far. Weaker diamond prices have weighed on its performance this year. Lucara’s steep decline since 2016 has pushed it to micro-cap levels.

In the first quarter of 2020, Lucara reported total revenue of $34.1 million. Meanwhile, it finished the quarter in a strong cash position with solid liquidity. Lucara is a solid option for investors who are on the hunt for a safe-haven alternative that is not gold, silver, or platinum. This is a volatile stock with big upside in a TFSA.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Goodfood Market and Savaria.

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