Do you have some spare cash left over from the holidays? It might be a good idea to think about making that money work for you. Most things we buy for Christmas tend to depreciate quickly. Yet, stocks in great-quality businesses tend to appreciate.
If you can defer your spending in the near term and save some cash for investing, you can grow your wealth over the long term. Are you wondering what type of stocks to buy for long-term gratification? Here are three TSX stocks to consider adding for some good upside in 2024.
A top TSX transport stock
TFI International (TSX: TFII) has built a very strong business in a challenging sector. Trucking and shipping businesses are asset and staff intensive. Profit margins are low and require carriers to take on large volumes of business.
TFI has found a way to navigate this dynamic. It only focuses on profitable business. It has an efficient operating model that allows it to earn above-industry profits.
Likewise, it generates a lot of excess cash that it tends to plough into acquiring other transport service providers. It has made 125 acquisitions in the past 15 years.
This TSX stock is down after a challenging economic environment slowed shipping volumes. TFII stock only trades for 15 times next year’s earnings. This could be an attractive entry given this stock has delivered +20% annual returns over the past 10 years.
An undervalued software stock
Another TSX stock to consider adding to is Enghouse Systems (TSX: ENGH). Enghouse is a longstanding Canadian software stock. It provides communication and asset management software around the world.
The company had a massive growth tailwind from COVID-19, but that business fell off as quickly as the pandemic rose. Enghouse has traditionally grown by acquiring smaller software providers. However, valuations have been elevated, and it hasn’t been until recently that it has been able to acquire businesses.
The company is super focused on profitability and generating cash. It has a great balance sheet with +$200 million of cash. If Enghouse can hit its 20% annual return target on new acquisitions, it could start to return to growth very soon.
Enghouse only trades for 15 times free cash flow, and it pays a nice 2.5% dividend yield today. This TSX stock could see a strong recovery in 2024.
A TSX turnaround stock
A final stock that could be set for a turnaround is Trisura Group (TSX: TSU). With a market cap of $1.6 billion, it is a decently large company in Canada. Yet, many people have never heard of it.
That is largely because it provides specialized insurance solutions for niche applications like surety, warranty, business solutions (cyber, directors and officers, etc.), and fronting. The company is established in Canada, but it is expanding its presence in the U.S.
The stock is down because of a program write-down that occurred early in the year. The company has worked hard to resolve that issue, and recent quarters have demonstrated strong growth again.
Right now, it trades at 13 times forward earnings and 2.68 times book value. However, that is at a significant discount to other specialty and fronting model insurance peers.
The company has a great long-term record of returns. If it can continue its high-teens, low-20s% earnings growth, it should see a strong recovery in the years ahead.
