3 TSX Stocks on My Watchlist

Some smaller companies continue to pique my interest.

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As an active investor, I’m always looking for ways to strengthen my portfolio. Over the past couple years, I’ve managed to build a very aggressive portfolio geared towards growth. Now, I’ve reached a point where I should start considering wealth preservation in addition to wealth accumulation. Therefore, I’ve been looking for blue-chip companies that could provide reasonable growth. However, there are some smaller companies that continue to pique my interest. Here are three TSX stocks on my watchlist.

Boring can be beautiful

Warren Buffett is known as one of the best investors of his generation. One of his most well-known mottos is, “Boring can be beautiful.” By that, he means that companies that fall to the background in terms of attention and go about their business year after year can end up being some of the best investments you’ll ever make. When it comes to Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM), that describes the company perfectly. Brookfield isn’t a flashy company, but it seems to get the job done year after year.

Brookfield has a portfolio of approximately $625 billion in assets under management. This makes it one of the largest alternative asset management firms in the world. Not only is its portfolio large, but it’s also diverse. The company holds assets in the real estate, infrastructure, and utility industries. In addition, Brookfield holds a large portfolio consisting of private equities. A leader within the Canadian financial sector, Brookfield has managed to generate an average annual return of 16% since August 1995.

A legend within the Canadian tech sector

There are few stocks on the TSX that have been able to produce the same kind of gains as Constellation Software (TSX:CSU). Since its IPO in May 2006, Constellation Software stock has gained nearly 12,000%. The company attributes its success to its simple business strategy. To put it simply, Constellation looks for good companies and provides the coaching and resources needed in order for the acquired company to become a leader in its industry.

Since being founded, Constellation Software has acquired more than 500 businesses. For most of its history, those acquisitions have been small- and medium-sized vertical market software companies. Earlier this year, Constellation’s president Mark Leonard announced that the company would start targeting large VMS businesses. This is a very interesting decision and could be a vital catalyst for Constellation Software stock moving forward.

Another play on the e-commerce industry

In addition to the two blue-chip companies mentioned earlier, I am considering expanding my exposure to the e-commerce industry. Goodfood Market (TSX:FOOD) is an online grocery and meal kit company. It’s estimated that the company holds a 40-45% share of the Canadian meal kit market. As one of the fastest-growing online grocery companies in Canada, we could see this market share increase in the coming years.

In fiscal year 2017, Goodfood reported $20 million in revenue. As of its Q3 earnings report this year, Goodfood recorded $384 million in revenue over the past 12 months. That shows that the company is growing at an incredible pace. It’s no secret that the COVID-19 pandemic has caused the online retail market to become a much more important part of our everyday lives. Many consumers, including me, have turned to online groceries at some point over the past year. As e-commerce continues to grow, Goodfood should as well.

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 Jed Lloren has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV, Constellation Software, and Goodfood Market Corp.

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