2 TSX Stocks I’d Buy With a $6,500 TFSA Contribution

Building your TFSA nest egg requires careful selection of the stocks you buy with the yearly contributions.

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For most Canadian investors, it’s not feasible to contribute the whole monthly contribution room amount ($6,500 for 2023) at once to the Tax-Free Savings Account (TFSA). Some spread out the contributions over the whole year, while others rely on bonuses or extra income for their contributions. Regardless of what your contribution frequency is, you may consider two stocks for your 2023’s TFSA contributions.

A tech stock

Many tech stocks in Canada are still discounted, but few are down as much as Vancouver-based Absolute Software (TSX:ABST). The stock is down 45% from its 2021 peak, and a major portion of this slump is in 2023. Still, the discount doesn’t undermine the inherent strengths of the company, especially in the current environment.

Absolute Software is a digital/cybersecurity company focusing on end-point and access security. End-point security is the company’s forte, and its product gives businesses visibility and control over all their end-points while improving its resilience and protection against threats like ransomware.

These products allow companies to protect their devices like cell phones, computers, and other digital devices against a wide array of threats and ensure that even in the event of a successful attack, the network survives, and the damage is as little as possible.

Absolute is one of the few tech companies that offer dividends, and the yield, thanks to its hard slump, is currently 2.9%. But the primary reason to park your TFSA contribution is this tech company is the capital-appreciation potential it offers. The company offers long-term growth potential (in a healthy market) and powerful short-term growth spurts when the right market conditions align.

The current slump and the growing need for end-point security, with remote working becoming the norm, and more Internet of Things devices coming online (which are contributors to the organic growth of Absolute’s business) make it a compelling buy for recovery.

A healthcare stock

Despite being one of the most overvalued stocks in Canada right now, WELL Health Technologies (TSX:WELL) is another viable candidate for your TFSA contributions. The company combines healthcare with technology, but not in a niche, cutting-edge way. It’s all about making telehealth and digital health service more mainstream and available to a wide array of healthcare professionals and patients.

The numbers related to its platforms paint a very encouraging picture. The company has over 2,500 healthcare providers directly connected to it, and over 22,000 leverage its platform. It is already at the centre of a budding ecosystem with over 40 applications.

The stock has experienced powerful growth in the past, and after going through a modest period of correction, it’s already going up at a powerful pace. It rose by about 1,700% in three years (2018, ’19, and ’20). After losing over two-thirds of its value to a brutal correction, the stock has entered another bull market phase that has pushed it up over 90% in 2023 alone, and we are not even halfway through 2023.

Foolish takeaway

The two stocks might be worth buying now, albeit for different reasons. WELL Health is already bullish and can help you grow your nest egg by allowing your capital to ride the current growth momentum. Absolute Software is attractive because of its discount and the growth it promises via recovery.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Absolute Software. The Motley Fool has a disclosure policy.

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