Your Tax-Free Savings Account (TFSA) can be the perfect place to build your retirement nest egg, especially if you have a well-thought-out strategy and approach to picking the stocks.
You can adhere to certain core holdings that are stable enough to be bought in virtually any market. Or you can look for stocks that are attractive (for their discount, valuation, recovery potential, bullish/bearish trend, etc.) at the time of your investment.
A good mix of both may yield the best results. Currently, three stocks can help you achieve such a mix.
Nuvei (TSX:NVEI) is a financial services company specializing in payment solutions. It’s positioning itself as a leader in the global payment (primarily online payment) industry, and considering its client portfolio, extensive range of solutions, and aggressive acquisition strategy, it may achieve that goal.
The company has rapidly grown its global reach, and even though its financials reflect its growth, the stock’s performance does not.
After powerful initial growth that was augmented/facilitated by the tech sector’s growth as a whole, the stock has mostly gone downwards. It’s currently trading at a price 86% of its 2021 peak. The valuation doesn’t seem very attractive either. Much of this slump can be attributed to short-sellers’ reports about the company.
However, the fundamental strengths of the company are sound, and its financial growth has been quite decent. Also, it’s trading below the low target price set by many industry experts, which indicates room for growth, even if it’s not in the short term.
As the largest and most prominent cargo airline company in Canada, Cargojet (TSX:CJT) stock has enjoyed ample growth. It is trading at a price point 1,000% higher than its 2011 price tag. However, the bullish momentum that carried the stock to its peak ran out by the end of 2020, and the stock has slumped over 58% since then.
One positive side effect of this slump is that the airline is now far more attractively priced than it was before the pandemic. Its financials and operational strengths are still relevant, and the company looks well positioned for a solid and long-term recovery/growth phase.
It may not be as explosive as the company’s growth in the past, but even if it can grow half as well as it did in the last decade, the returns can significantly inflate the size of a TFSA nest egg.
National Bank of Canada (TSX:NA) is the evergreen pick that’s attractive no matter when you buy it, especially if you are planning to hold it for the long term. It’s the best grower among the Canadian bank stocks and, in the last decade, has returned over 240% to its investors, which is considerably higher than the next best returns among the Big Six (about 180%).
It offers a healthy combination of dividends and capital growth potential, making it a compelling choice for a dividend-reinvestment plan (DRIP) based strategy.
A DRIP allows you to reinvest the dividends in the stock, so even if you don’t buy any new shares of the company, your stakes will keep growing as your dividends get reinvested.
So, when you start cashing out your dividends in the future, the underlying stake/number of shares might be significant enough to generate a substantial dividend income.
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The three stocks can be perfect for 2023 TFSA contributions. Two of the stocks are heavily discounted, and even though it’s difficult to pinpoint when they will start recovering, the probability that they will recover is quite decent.
The explosive gains that their recovery promises make them ideal picks for rapidly growing your TFSA nest egg.