Millennial TFSA (Tax-Free Savings Account) investors shouldn’t seek to chase just any stock after the S&P 500 just had its swiftest recovery from a correction in recent memory. But that doesn’t mean being glued to the sidelines, either. Not when there are still great deals to be had across the value-rich TSX Index.
As the Bank of Canada (BoC) looks to weigh its options, with inflation inching closer toward the target level of 2%, I think the Canadian economy may be in for a softish type of landing. Unlike the U.S. economy, however, a “no landing” type of scenario seems to be off the table. In any case, the TSX Index already looks to have a mild recession in mind.
In this piece, we’ll look at two Canadian stocks that still have plenty of runway over the next 10 years and beyond. Though a Canadian recession could make for a choppier ride, I’d not be afraid to be a net buyer for a long-term-focused TFSA retirement fund. At the end of the day, new investors should aim to maximize their time in the market rather than seeking to time the market!
TFSA top pick #1: Shopify
Up first, we have Shopify (TSX:SHOP), Canada’s top tech sensation led by visionary founder Tobias Lütke. The former high-flying growth darling is in the middle of a robust relief rally, thanks in part to a shift in strategy (away from logistics and back to investing in its platform) and a bit of relief on the rate front. As the BoC looks to cut rates, perhaps in the back half of 2024, Shopify stock may, once again, have the wind to its back.
Additionally, I’d look for Shopify to keep pulling the curtain on impressive new product offerings to widen its moat. Recently, the company launched a web version of its popular Shop app. As the company rediscovers itself and looks to expand into new growth areas (think digital payments), I think it’ll be tough to stop SHOP stock from becoming a more than $200 billion company again.
At nearly 13 times price to sales (P/S), SHOP stock may not seem to have any value associated with it. Still, if Lütke and company can keep expanding its growth horizons over the next decade, I’d not be surprised if we wind up looking back on the stock as an absurdly undervalued play. Indeed, the stock probably should have never traded at below $40 per share around a year ago.
Though we can’t go back in time and buy the stock, I think dollar-cost averaging into the stock and doubling down on pullbacks could prove wise to the millennial investors seeking to build a full position in the e-commerce innovator.
TFSA top pick #2: CIBC
The Canadian bank stocks have been staging a comeback of late. And CIBC (TSX:CM) has really heated up alongside the broader basket, with shares up nearly 13% since its October lows. I think the banks were oversold (especially CM stock), and this relief run could have room to extend into year-end and perhaps in the first quarter of 2024.
CIBC’s domestic mortgage exposure may give some the jitters. However, the stock’s already been punished severely, and if a softer landing can be engineered for the economy, I think investors have little to fear with CIBC stock while it trades at 11.1 times trailing price to earnings. The 6.5% dividend yield is also a thing of beauty. If you’re a believer in the big banks, perhaps a spot in a long-term-oriented TFSA is warranted!
