If you are hoping to create generational wealth by investing, the TFSA (Tax-Free Savings Account) is one of the best places to hold Canadian stocks. You don’t pay any tax on income earned in the TFSA. Likewise, you don’t pay any tax when you withdraw from the account.
If you hope for your capital to multiply many times during a lifetime of investing, you don’t want to be paying tax on any of those big gains. You want to keep all that built-up capital for yourself and for your family.
If you are thinking about what kind of stocks would be a good bet for multiplying wealth over the next 10 or 20 years, these three TSX stocks could be good for a TFSA.
A trucker with a great track record
TFI International (TSX:TFII) has a lot of the characteristics you want when holding a TFSA investment for years and decades. Its chief executive officer has a large 5.5% stake in the business. He has been running the business since the 1990s.
Management is very cognizant of how it allocates capital. It only takes on customer relationships that turn a high profit margin, even if it slows volume growth.
Since 2008, TFI has made 121 acquisitions in the United States and Canada. In that time, earnings per share have multiplied by 10 times. The transport industry continues to be incredibly fragmented, so there is no shortage of acquisition and growth opportunities ahead.
A leading global consulting firm
WSP Global (TSX:WSP) is another Quebec-based company that could be a good long-term TFSA stock. WSP operates one of the largest consulting, design, engineering, and professional service firms in the world. Like TFI, it has been extremely acquisitive. It has added over 100 firms into its fold over the past decade.
As the global population grows, companies and governments will need to invest in real assets and infrastructure. Challenges such as climate change, aging infrastructure, rising energy demand, and municipal expansion all create opportunities for WSP.
In its recent second quarter, WSP increased its guidance for the remainder of the year. All the above tailwinds are propelling better-than-expected growth. WSP is almost never a cheap stock. However, its high quality, diversified business model could consistently outperform for long-term TFSA investors.
A TFSA stock from a great family of companies
Another TFSA stock for potential long-term outperformance is Topicus.com (TSXV:TOI). Topicus.com is a consolidator and developer of vertical market software (VMS). Its focus is 100% in Europe. If you have heard of VMS, you are likely to think of Constellation Software.
Well, Topicus was spun out of Constellation only a few years ago. It is essentially enacting the same strategy. It buys niche software businesses at attractive valuations, enhances operations with best practices, yields a tonne of free cash flows, and then invests in more businesses.
Europe is an attractive market because of the wide array of countries, cultures, and languages. There are thousands of niche country- or industry-specific software businesses that Topicus can add to its portfolio.
Topicus’s management has a good stake in the business. Likewise, Constellation remains a large shareholder. With that team on your side, it is hard to go wrong.
I will disclaim that this stock is very pricey. Yet, if it can do even half the returns that Constellation delivered over the long term, TFSA shareholders should be very happy.
