The TSX contains many stocks that could generate excellent returns. However, it could be difficult to determine which stocks to hold in your portfolio. My strategy for choosing the best stocks starts with looking at a company’s total addressable market. Theoretically, if a company has the potential to serve a larger market, it could see greater revenues (and earnings) over time, leading to a growing stock price. Here are three TSX stocks that could generate massive returns.
This top stock should be in your portfolio
The first stock that could generate massive returns from here is Shopify (TSX:SHOP)(NYSE:SHOP). Upon reading that first sentence, I’m sure many readers would’ve skipped to the next stock already. However, it’s important that you realize how large this company could be. Today, Shopify is valued around $260 billion. It’s perfectly reasonable to expect Shopify to become Canada’s first $1 trillion company in a few years’ time.
What draws investors to Shopify is its leadership position within the rapidly growing e-commerce industry. As of its latest earnings report, Shopify held the second-largest share of the American ecommerce market in terms of revenue, only trailing Amazon. Impressively, Shopify’s total customer traffic surpassed Amazon for the first time in Q2 2021. This suggests that Shopify’s e-commerce growth may be more impressive than that of Amazon. With exposure to the e-sports, media, and physical retail industries, Shopify still has a lot more upside from here.
Don’t miss out on this stock
Aritzia (TSX:ATZ) isn’t like the other companies I tend to cover. As I said previously, it’s very important that companies address a large market. Generally, I’d like to see a company with a large presence in many countries around the world. However, Aritzia only has stores in Canada and the United States. Still, the opportunity surrounding this company is so impressive that I couldn’t leave it out of this article.
What’s interesting about Aritzia is how much the company is pushing its e-commerce channels. Its leadership group has recognized the need to shift according to consumer trends, and the company has benefited greatly. From 2016 to 2020, Aritzia’s e-commerce revenue grew at a CAGR of 36%. However, in 2021, the company grew its e-commerce revenue by 88%. In addition, e-commerce now makes up 50% of the company’s revenue compared to 23% last year. Aritzia stock has soared more than 100%, but it could go much higher.
This is an important and emerging industry
It seems like the excitement surrounding the renewable energy industry has died down a bit, but there’s no denying that it remains one of the most important industries moving forward. Motley Fool co-founder, David Gardner, says that one way of spotting a potential massive winner is by finding companies that lead important and emerging industries. Of the leaders in this space, Brookfield Renewable (TSX:BEP.UN)(NYSE:BEP) appears the most attractive.
Brookfield Renewable operates a diverse portfolio capable of producing about 21,000 MW of power. Upon completion of its current construction projects, the company expects to more than double its current generation capacity. Brookfield Renewable is a top stock with a great track record. Since its IPO, the company has generated an average annual return of about 18%. It’s expected that investors will continue to pour money into this space in the future. If you want to invest in the leading horse in the race, Brookfield Renewable is a stock for you.