Your TFSA (Tax-Free Savings Account) is a tremendous tool to help you compound wealth over time. Indeed, whenever you can take taxes that chip away at capital gains and dividends out of the equation, you can give your retirement a jolt. Though some may choose to maximize potential gains in their TFSA, with riskier, high-volatility securities, I’d urge most investors to consider maximizing their risk-adjusted returns over time instead.
Indeed, smart investors know it’s all about the risk/reward scenario. Some risks are worth taking if the potential rewards are great. If the rewards and potential risks you’ll bear are high, it may make sense to pass up a name for your TFSA, as it should really be reserved for the stocks you cherish most and wish to hold over extended periods of time.
In this piece, we’ll check out three intriguing Canadian stocks that can help TFSA investors kickstart their retirement funds.
Parkland Fuel
Up first, we have gas station retail firm Parkland Fuel (TSX: PKI), which has recovered considerable ground in recent quarters after falling into a multi-year slump. Year to date, PKI stock is up an impressive 29%. Despite the remarkable run, shares are still more than 22% off their 2020 all-time highs as of writing. Moving ahead, the $6.6 billion retailer looks in a great position to continue its recovery.
For the latest quarter, Parkland Fuel clocked in a mixed quarter that saw earnings per share (EPS) come in at $0.44. That’s shy of the estimate, which called for $0.67. Revenue came in at $7.8 billion. At 19.5 times trailing price to earnings (P/E), with a 3.68% dividend yield, PKI still stands out as a great relative bargain on the TSX.
Loblaw
Loblaw (TSX: L) stock has been consolidating for well over a year now. Indeed, after such a remarkable 2021-22 rally, shares were in need of a breather. As inflation and economic pressures continue to weigh, I think the next major move for L stock is higher.
Though the company has received flack for some of its absurdly priced food items, I still think the firm retains its reputation for offering a solid value proposition. That said, the social media backlash regarding price gouging combined with the impressive 2021 run-up in the stock does not give Loblaw a good look through the eyes of its consumers.
In any case, L stock looks cheap at just 19.4 times trailing P/E, with its 1.49% dividend yield. In the face of recession, I think Loblaw is where you’ll want to be.
Fairfax Financial Holdings
Fairfax Financial Holdings (TSX: FFH) is an insurer and investment holding firm that’s exploded higher over the past year. Undoubtedly, the run can’t last forever, with shares up more than 220% as of writing since its 2020 lows.
That said, the valuation and earnings power, I believe, could propel shares even higher over the next 18 months. The stock trades at just 8.2 times trailing P/E. Impressive underwriting margins have really played a major part in the company’s return to the spotlight. As investments pick up traction, I think it’ll be tough to dethrone the underrated Canadian financial, as it feels the wind to its back for a change.
