3 Stellar Stocks to Build Retirement Wealth

Constellation Software (TSX:CSU) and two other Canadian stocks that have what it takes to beat the markets over the long run.

| More on:
A person builds a rock tower on a beach.

Source: Getty Images

If you’re a relatively young investor seeking to position your portfolio in a way to build immense retirement wealth over time, the recent August market pullback should be viewed as a good thing! If you’ve got the liquidity, how could a sell-off in markets be a bad thing? Though the bearish commentary is likely to come out in full force again, I’d not get caught up in the nerve-rattling headlines.

At the end of the day, market corrections and seasonal pullbacks are part of a healthy bull market. Though they’re not pleasant in the moment, buyers on such dips can better position themselves for the long haul, as they pursue shares of wonderful companies at lower prices.

In this piece, we’ll check out three stellar stocks that Canadian investors may wish to target as the August slump continues.

CN Rail

CN Rail (TSX:CNR) stock is fresh off a correction, now down around 11% from its all-time high. Over the years, CNR stock has endured its fair share of pullbacks. Every time, it has recovered, even in the face of macro uncertainty.

At this juncture, CNR is in a bit of a rut of nearly two years. With a modest 19.5 times trailing price-to-earnings multiple and a 2.05% dividend yield, I view CNR stock as more of a contrarian value pick than a Dividend Aristocrat that’s lost its way.

Sure, macro headwinds and rail industry challenges could persist for another year, as recession rocks the Canadian economy. Still, CN Rail stands out as one of the wide-moat companies that will eventually find its way. Perhaps more management changes may be needed to bring CN Rail stock out of its funk. Regardless, I’d not bet against the time-tested $100 billion firm in its moment of pressure.

Constellation Software

Constellation Software (TSX:CSU) isn’t as exciting as some of the American mega-cap tech companies, especially those with front-row seats to the rise of artificial intelligence (AI). What Constellation does have, though, is a knack for spotting value in the Canadian software scene. Of course, small-cap Canadian tech can be a tough place to invest in unless you’re a seasoned veteran.

Fortunately, Canadian investors don’t need to be one to benefit from the rise of intriguing Canadian software startups. Through Constellation Software, investors are getting stellar managers who know how to create long-term value via tech-focused M&A.

The $56.9 billion company isn’t a secret anymore. However, I do think it can continue its pace of gains for investors, as it looks to make new all-time highs after its latest summertime breakout. At 30.6 times forward price-to-earnings, CSU stock makes for a great buy if you’re looking to score TSX-beating results over time.

National Bank of Canada

National Bank of Canada (TSX:NA) stock just slipped below $100 per share after falling alongside the broader S&P 500 in August. At 10.7 times trailing price-to-earnings, I view the relatively small ($33.6 billion market cap) bank as one of the best bets of the peer group. Like it or not, new highs are within striking distance, with shares down just around 5% from its peak.

Given how many of National’s bigger brothers are in their own bear markets (down 20% or more from highs), I’d argue National’s relative performance is remarkable. I think NA stock can keep outpacing its bigger brothers, even as the recession moves closer. It’s an incredibly well-run bank that may also be one of the most innovative in Canada!

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 Joey Frenette has positions in Canadian National Railway. The Motley Fool recommends Canadian National Railway and Constellation Software. The Motley Fool has a disclosure policy.

More on Bank Stocks

Bank sign on traditional europe building facade
Bank Stocks

Canadian Bank ETFs: An Easy Way to Invest in the Big 6

For long-term investing, ZEB is a good bet. If you expect the bank stocks to be depressed in the near…

Read more »

question marks written reminders tickets
Bank Stocks

Should You Buy CIBC Stock for its 6.5% Yield?

Canadian Imperial Bank of Commerce (TSX:CM) released Q3 earnings that fell short of expectations, but I’m still stacking CIBC shares…

Read more »

tsx today
Bank Stocks

TSX Today: What to Watch for in Stocks on Thursday, August 31

With its 1.4% month-to-date losses, the TSX Composite Index seems on track to end August in the red.

Read more »

stock analysis
Bank Stocks

3 Stocks You Can Keep Forever

You don’t need to think twice about loading up on any one of these three Canadian stocks.

Read more »

grow money, wealth build
Dividend Stocks

Buy This Blue-Chip Dividend Stock and Relax

This blue-chip dividend stock is the perfect choice if you're looking for safe income and a quick rebound in this…

Read more »

money cash dividends
Bank Stocks

Better Income Play: GICs or Bank Stock Dividends?

Using long-term capital, investors can buy big Canadian bank stocks like Bank of Nova Scotia for more income.

Read more »

tsx today
Bank Stocks

TSX Today: What to Watch for in Stocks on Tuesday, August 29

Rising oil and metals prices could lift TSX commodity-linked stocks further at the open today.

Read more »

Businessman looking at a red arrow crashing through the floor
Bank Stocks

Better Buy: Scotiabank or CIBC Stock?

Bank of Nova Scotia (TSX:BNS) and CIBC (TSX:CM) are getting dirt-cheap as bank stocks keep on sinking lower.

Read more »