TFSA Investors: Where to Invest $6,500 Right Now

TFSA investors should create a diversified portfolio of growth and blue-chip stocks, allowing them to outpace the broader markets.

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IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT

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The TFSA (Tax-Free Savings Account) is an extremely popular registered account among Canadians. Introduced in 2009, any gains generated in this inflation-linked account are sheltered from Canada Revenue Agency taxes.

The annual contribution limit in the TFSA increases each year and is $6,500 for 2023, taking the total contribution room to $88,000. Due to its tax-sheltered status, the TFSA is an ideal instrument for you to hold growth stocks, allowing you to generate outsized gains over time.

Here’s where I would invest my $6,500 TFSA contribution room today.

CrowdStrike stock

CrowdStrike (NASDAQ:CRWD) operates in the cybersecurity segment and is among the fastest-growing large-cap stocks globally. It leverages artificial intelligence (AI) capabilities to detect and prevent security breaches, allowing the company to expand its customer base at an impressive pace.

As of fiscal 2023 (ended in January), over 50% of Fortune 500 companies were CrowdStrike’s customers, which included 15 of the top 20 banks south of the border. In addition to an impressive customer expansion rate, CrowdStrike has successfully increased enterprise spending on its platform.

For instance, in the fiscal first quarter (Q1) of 2024, 62% of customers subscribed to at least five products, while 40% of customers subscribed to more than six products. It ended Q1 with a dollar-based net retention rate of 125%, which indicates existing customers increased spending by 25% in the last 12 months.

Down 51% from all-time highs, CRWD stock trades at a discount of 27% to consensus price target estimates.

Snowflake stock

Another high-growth tech stock is Snowflake (NYSE:SNOW), which offers an enterprise-facing data cloud product, allowing customers to store, protect and analyze huge sums of data. Unlike Amazon’s Web Services or Microsoft’s Azure, customers can integrate Snowflake’s platform regardless of the infrastructure provider.

Snowflake ended fiscal Q2 of 2024 with 8,500 customers, an increase of 25% year over year. As customer spending rose by 41% in Q2 (ended in July), Snowflake increased its top line by 41% to US$1.3 billion.

Despite its stellar top-line expansion, Snowflake remains unprofitable and reported losses of US$453 million in the last two quarters, up from US$389 million in the year-ago period. But analysts remain bullish and expect SNOW stock to surge over 30% in the next 12 months.

Canadian National Railway stock

The final TFSA stock on my list is Canadian National Railway (TSX:CNR), a domestic giant valued at $100 billion by market cap. Armed with a coast-to-coast network in Canada, the company delivers around six million carloads over its track spanning 19,600 miles.

CNR hauls intermodal containers, petroleum and chemicals, grain and fertilizers, forest products, metals and mining, auto-shipments, and coal, among others.

Due to its wide economic moat, CNR reported a gross margin of 56% and a net margin of 30% in the last 12 months, which is in the top percentile compared to peers. Moreover, in the past decade, the blue-chip giant has increased 5.5% annually while earnings growth stood at more than 10%.

Its durable cash flows allow CNR to pay shareholders an annual dividend of $3.16 per share, indicating a yield of 2.1%. With a payout ratio of 39%, CNR has room to increase dividends and lower balance sheet debt or invest in growth projects, which should drive future cash flows higher.

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Amazon.com, Canadian National Railway, CrowdStrike, Microsoft, and Snowflake. The Motley Fool has a disclosure policy.

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