How is your retirement planning going? Have you started saving separately other than the Canada Pension Plan (CPP)? It is time to pick up momentum and maximize the potential of your retirement portfolio. The markets are bearish. Some fundamentally strong stocks are trending lower. These growth stocks have the potential to grow multi-fold in the long term.
Two stocks to maximize your retirement potential
When you buy a growth stock at its dip, you get an opportunity to add the recovery growth to the long-term growth trajectory and boost your retirement potential. At which stage should you invest your retirement portfolio in growth stocks?
When you are at least 10-15 years far from retirement, you have the time and ability to take some risks and give your money a chance to grow. If you are in your mid-30s or early 40s, you could consider investing $5,000 each in the below two stocks through your Registered Retirement Savings Plan (RRSP).
Descartes Systems stock
Descartes Systems (TSX: DSG) is a long-term growth stock. It is in a business that will grow and become more complex as the economy develops. The company provides supply chain management solutions. The need for such solutions has been growing with every passing year. This software-as-a-service company benefits from scale. It is now in a stage where profit margins are growing.
The stock falls when the market is weak and rises when the market is strong. What makes me optimistic about this stock is its strong balance sheet and profit margins. A 42% adjusted earnings before interest, taxes, depreciation, and amortization margin, $182.2 million cash reserve, and $6.87 million debt in the first quarter show the company can sustain a recession.
Descartes is using this time to acquire software companies specializing in e-commerce last-mile delivery technology, as it sees huge potential. The stock has the potential to grow alongside the revenue and margins.
After the tech bubble burst of 2022, investors are more inclined towards profitability than revenue growth. While Descartes stock is trading at 45.5 times its forward earnings per share, it is better than rival Kinaxis, which is trading at 90 times its forward earnings.
A price below $99 is a good buy point for Descartes, as it prepares for the e-commerce trend. It could double your money in three to five years. And if you hold it for a decade, the stock could compound your $5,000 by five to seven times.
Magna stock
Magna International’s (TSX: MG) stock has been at a tight spot after reaching a peak in 2021, as the automotive industry faced the worst chip supply shortage. Being an auto components supplier, Magna had orders it could not fulfil due to a lack of components. But things are gradually unwinding. The pent-up demand for two years is returning and boosting its earnings.
The second-quarter earnings saw a jump in sales (17%) and adjusted earnings per share (81%). Magna once again revised its 2023 sales outlook from US$40.2-US$41.8 billion to US$41.9-US$43.5 billion.
This improvement comes as Magna absorbed the losses from the Russian facilities last year and improved efficiency and product mix. The chip shortage and high commodity and energy prices are behind Magna. Now, it is set to benefit from the electric vehicle (EV) trend. Riding the EV wave, the stock price could surge past $110 as it did in early 2021.
And if you hold the stock for a longer period, it could grow your money further, as Magna bucks the autonomous driving trend through contract manufacturing. Looking at the long-term perspective, tech companies have entered the automotive space. The way tech functions, the upgrade cycle is small. Tech companies design the tech and outsource the manufacturing. Magna looks to tap that trend early. If things work out the way Magna planned, the stock could grow significantly in the long term.
A $5,000 investment in Magna stock could bring good returns in a decade.
