If you invest in Canadian stocks, you’d be well advised to plan to hold forever. That’s not to say that you should never sell stocks — to the contrary, you should sell them fairly regularly. However, you should always start off owning a stock with the assumption that you’ll hold it forever. That mindset will tune your mindset to that of a long-term shareholder. With individual stocks, you may eventually want to sell when clear overvaluation emerges — though you shouldn’t plan on selling from the outset. In this article, I will explore three Canadian stocks that I would be comfortable holding forever–two of which I do, in fact, own with long holding periods in mind.
TD Bank
Toronto-Dominion Bank (TSX:TD) is a Canadian bank stock that I have held for about five years. I sold a large percentage of my TD shares last year when I heard the company was under investigation for facilitating money laundering. I later bought them back when the price went below $78.
TD Bank is a very profitable company and is growing fairly rapidly for a bank. It has a 22% net margin, which means that it transforms $22 of every $100 in revenue it earns into profit. It also has a 9.61% return on equity, which means that earnings are fairly high as a percentage of investor wealth.
Although I sold a portion of my TD shares last year, it was not my intention to exit the position completely. I thought that the money laundering concerns merited a smaller weighting, as such concerns led to billions of dollars of fines at Wells Fargo. Later, though, the stock got much cheaper than it had been previously, and news surfaced that TD was only looking at something like US$8 million in fines due to the money laundering investigation. So, I started buying the stock back cheaper.
Brookfield
Brookfield Corp. (TSX:BN) is a Canadian stock that I started buying just last year. It’s a diversified financial holding company. It owns many valuable assets, including the following:
- 75% of Canada’s largest alternative asset manager
- A wholly owned insurance company that is growing earnings at more than 100% year over year
- Large stakes in several Brookfield partnerships
Brookfield stock is currently cheap, going by net asset value (NAV), which is the difference between all the assets in the Brookfield partnerships and their debts. The net value of Brookfield’s partnership stakes exceeds Brookfield’s market cap, which is the value of all of Brookfield’s shares. So, Brookfield appears to be a good value play.
CN Railway
Canadian National Railway TSX:CNR) is a railroad stock that I owned in the past and did, in fact, sell. It might seem strange to mention a stock that I sold in an article about stocks I plan on holding forever, but I didn’t sell CNR because I stopped thinking of it as a good investment. Instead, I sold the shares to make an investment in Berkshire Hathaway stock, which worked out well. Had funds not been limited, I’d have kept CNR.
What does CN Railway have going for it? First of all, it’s a pillar of the North American economy, transporting $250 billion worth of goods each year. Second, it’s extremely profitable, with a 33% net margin. Finally, it has only one competitor in Canada and only a small handful in the United States. On the whole, it’s a great value.
