With the onset of a new year, you might be planning how to build wealth by investing in stocks. When you buy a stock, you are buying a stake in a real business. A simple key to investing success is to find the best businesses and then hold them for long periods of time.
Over long periods, stocks tend to follow the success of a business. If they consistently grow earnings and cash flows, their stock is very likely to follow that success.
The best thing you can do for your wealth is to let great businesses build value for you. When you find a great company, don’t trade in and out. Take a long-term approach, and you will be glad you did. If you have $1,000 to invest, here are three growth stocks to consider for the long term.
A diversified industrial stock ramping growth again
Calian Group (TSX: CGY) is one stock the market doesn’t talk much about. However, it has been transforming into a mixed industrial machine. It operates four core segments focused on healthcare, cybersecurity/IT, training, and specialized technologies.
Its customer mix is about 50% government and 50% private. It used to be largely exposed to Canada, but recent acquisitions over the past few years have expanded its presence in the U.S., Europe, and Asia/Pacific.
Last year’s results were disappointing due to a one-off weak quarter. However, management was quick to rectify its cost basis and return margins to normal levels.
After making two large acquisitions in 2023, it expects to grow revenues by +10% and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by +25%. If it can hit that goal, its valuation is pretty attractive at today’s price.
Trisura: A little insurer with a big future
Another great, growing business is Trisura Group (TSX: TSU). With a market cap of $1.8 billion, Trisura is a small insurance provider in Canada and the United States. It provides niche, specialized insurance products where it can earn strong returns on equity.
It also has a fronting operation in the U.S. that has been quickly growing. The company has been growing its product mix and geographic presence.
It has grown its earnings per share by a 40% compound annual growth rate over the past five years. That is even after a tough year, where it had a significant business line write-down.
This is a riskier business, so investors need to be aware that its stock can be volatile. However, it trades well below its U.S. peers. If it can return to strong growth in 2024, its stock could easily re-rate significantly up.
Sylogist: A turnaround unfolding
Sylogist (TSX: SYZ) is another stock that is not on many investor’s radar. It provides enterprise resource planning (ERP) and customer relationship management (CRM) software solutions for the education, non-profit, and government sectors.
The company has a new chief executive officer and is completing a turnaround. It has been investing in its sales funnel and expanding its product reach into new regions and categories.
It is posturing for the Rule of 40. That means that profit margins and revenue growth should add up to 40% or more. Sylogist trades at a fraction of other peers, despite it making strong recent business gains. It could be a big winner in 2024 and beyond.
