Global equity markets could remain volatile in the near term, as interest rates could remain higher for extended periods due to sticky inflation and continued economic growth. However, long-term investors should not get bogged down by these short-term fluctuations and go long on quality stocks. Meanwhile, here are my three top picks that you can buy and hold for a longer horizon.
Dollarama
Dollarama (TSX:DOL) is one of the top stocks to have in your portfolio due to its stability and high growth prospects. Over the last 10 years, the company has grown its revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) at an annualized rate of 10.7% and 16.7%, respectively. Supported by these strong financials, the company has delivered impressive total shareholders returns of around 682%, outperforming the broader equity markets.
Meanwhile, I expect the upward momentum to continue, given Dollarama’s healthy growth prospects. Its compelling value offerings, solid product mix, and extensive store base could continue to drive its sales. Also, the company plans to expand its footprint by increasing its store count to 2,000 by 2031 from 1,462 as of October 30. The new stores have achieved an average annual revenue of $2.6 million within two years of opening, resulting in efficient capital utilization and high returns on investment.
Dollarcity, where the company has acquired a 50.1% stake, is also expanding its footprint. It hopes to reach 850 stores by 2029 from 395 at the end of the third quarter of fiscal 2023. The company has paid quarterly dividends consistently since its inception in 2011. So, I believe Dollarama would be an excellent long-term bet.
Waste Connections
Waste Connections (TSX:WCN), a waste management company, would be my second pick. It has an excellent track record of enhancing shareholder value by delivering a total shareholder return of over 5,800% from 1998 to 2022.
With its operations primarily in exclusive and secondary or rural markets, the company enjoys higher margins, despite its aggressive acquisition strategy. Last year, the company deployed around $2.3 billion, making 24 acquisitions, which could contribute $640 million to its annual revenue. Despite these acquisitions and record inflation, the company’s adjusted EBITDA margin stood at a healthy 30.8%. It also generated an adjusted free cash flow of $1.165 billion for the year.
Further, the company’s management hopes to grow its 2023 revenue by 11.6% amid a 9.5% price rise and the rest from strategic acquisitions. The management expects its adjusted EBITDA margin to expand 30 basis points to 31.1%. So, I expect the uptrend in Waste Connections’s stock price to continue.
Cargojet
Cargojet (TSX:CJT) offers overnight time-sensitive air cargo services to prominent cities across Canada. The demand for air cargo services could grow at a CAGR (compounded annual growth rate) of 4% through 2030 amid e-commerce growth. Meanwhile, the global freighter fleet could only grow at 2.4%, thus creating a supply-demand imbalance, benefiting existing air cargo service providers, such as Cargojet.
Amid the growing demand, Cargojet has planned to induct 12 aircraft over the next two years. The company’s financials are primarily stable and predictable, with 75% of its domestic revenue underpinned by long-term contracts. However, amid the recent pullback, the company has lost over half its stock value and trades at an attractive next 12-month price-to-earnings multiple of 18.4, making it an attractive buy.
