Constellation Software (TSX:CSU) is easily one of the best Canadian stocks to invest in for the long haul. For example, early investors in the stock have witnessed an initial $10,000 investment turn into $1 million!
Even if you’d only invested in it 10 years ago, the stock still turned a $10,000 investment into approximately $207,590 for total returns of about 35% per year — more than four times the Canadian stock market rate of return of about 8.5% in the period.
The company has a track record of generating high returns on equity, which averaged north of 46% in the past five years! At the recent quotation of $2,756.69, the top tech stock is fairly valued according to the analyst consensus 12-month price target.
As Constellation Software is expected to continue to experience high earnings growth of potentially around 30% per year over the next few years, it could be a good holding to support the compounding of your wealth in a diversified TFSA portfolio.
Another stock that has compounded its shareholders’ wealth at a high pace is Alimentation Couche-Tard (TSX:ATD). Early stock investors of the global convenience store consolidator could also have turned into a millionaire by investing $10,000 initially.
Even if you’d only invested in it a decade ago, the stock still turned a $10,000 investment into approximately $75,200 for total returns of about 22% per year, which was about 2.6 times the Canadian stock market rate of return in the period.
Couche-Tard is a free cash flow-generating machine. In a normal year, it can generate free cash flow north of US$2 billion. In the past three fiscal years, it used about 37% of its operating cash flow to reinvest into the business, while having almost US$7.5 billion of free cash flow leftover for other things, such as its dividend.
In fact, it has increased its dividend for about 13 consecutive years with an incredible 10-year dividend-growth rate of approximately 25%, which was hard to beat. Management still sees plenty of merger and acquisition opportunities, particularly in Asia and the United States. So, the fairly valued stock could be a good long-term hold in a TFSA.
Brookfield Corp. (TSX:BN) is focused on making great capital allocation and solid long-term investments. It targets to earn total returns of north of 15% per year for its long-term shareholders. Its capital is invested across three places: asset management, insurance solutions, and its operating businesses across real estate (primarily core office and retail properties), renewable power, infrastructure, and private equity. Its competitive advantages include its operational expertise, value investing prowess, global reach, and the large scale and flexibility of its capital.
From 10 years ago, an initial investment of $10,000 turned into “only” about $38,890 for total returns of roughly 14.5% per year, which still beat the market but not as great an investment as the other two stocks.
However, for investors who can withstand the volatility, Brookfield is probably the best bet of the three stocks right now for long-term wealth creation, because it has corrected more than 25% from its 52-week high.
The analyst consensus 12-month price target of US$48 per share suggests the undervalued stock trades at a substantial discount of about 35%, which could help propel it to be a huge winner in the TFSA over the next five to 10 years.