With the year almost over, you may have some cash left over for your TFSA (Tax-Free Savings Account). The TFSA contribution increased by $6,500 in 2023. That is $6,500 that can be invested, earn income, and be safe from tax liability.
Every investor in the stock market should take advantage of the TFSA’s benefits. Where else can you invest, grow your capital, and keep all the returns? If you are wondering where to invest that $6,500 TFSA contribution, here are three ideas to consider in December.
A beaten-down tech stock for TFSA upside in 2024
Enghouse Systems (TSX: ENGH) was once known as a top Canadian growth stock. The company has grown by consolidating communication and asset management software businesses.
Over the pandemic, it saw a massive surge in demand for its communications services. Its stock subsequently soared.
Unfortunately, that demand declined almost as quickly as it started. Enghouse has seen nearly a year of negative revenue growth. Subsequently, this stock has given up all the gains it earned since 2019.
While nobody likes a decline in sales, the company is still substantially better than it was prior to the pandemic. Over the past three years, it has acquired several bargain-priced software businesses that have enhanced its capabilities. It has turned these into profitable businesses in a year or less.
Enghouse generates a tonne of cash from its businesses. Right now, it is sitting with $240 million of cash. A lot of businesses in its sectors are struggling, and valuations have declined. It has an exceptional opportunity to consolidate the sector and grow earnings/cash flows again.
A Canadian blue-chip stock to hold in a TFSA
A blue-chip stock that could be a good TFSA fit is Canadian National Railway (TSX: CNR). CNR is not a flashy growth stock. However, it has steadily delivered above-average returns for years.
Over the past five years, this stock has earned an 11.8% compounded annual total return. Over the past 10 years, it has done even better, with a 12.6% annual total return.
CNR has a relatively new chief executive officer who is working to improve efficiency (and profitability) while maximizing the utility of its North America-wide network. So far, she has been very successful. However, the transport industry has taken a recent hit from strikes, port challenges, weather events, and a fluctuating economy.
CN has a great balance sheet and the capacity for significant share buybacks/dividend growth in the coming years. CN makes for a solid anchor in any TFSA portfolio.
An underfollowed insurer that could soar in 2024
Trisura Group (TSX: TSU) is a provider of specialty insurance and fronting services in Canada and the United States. While this TFSA stock has not had a good year (it is down 31% year to date), it has delivered a 391% total return over the past five years.
Trisura stock is down due to a bad write-down at the start of 2023. Much of that has now been cleaned up. The company is returning to its previous growth profile. In its most recent quarter, it grew revenues by 33%, and operating earnings per share (before write-off charges) was up 46%.
This is a riskier investment as insurance can be nuanced and complicated. Yet, the stock is down substantially and trades at a large gap to peers. This TFSA stock could see considerable upside in 2024, but you will need to be patient through the volatility to get there.
