In Canada there are only a handful of exceptional businesses that have really delivered for shareholders. It is really challenging to disrupt an exceptional business. A great business tends to translate into a great stock. A stock that has already delivered strong performance is likely to continue to deliver strong performance in the future.
If you are looking for some of these great businesses/stocks, here are three I plan to hold forever (or at least a very long time).
One of the greatest of all-time Canadian stocks
Constellation Software (TSX: CSU) has defied all the odds. For years, market commentators have been saying its growth rate must slow down. Yet it continues to defy those odds.
The company is known for acquiring very small, niche software companies. It has recently expanded to acquire larger businesses and cut-outs.
So far, this move has been very successful. Not only has Constellation been able to acquire at attractive valuations, but it has also been able to drive strong operational results from these acquired businesses.
While growth could moderate in the coming years, Constellation still has excellent opportunities. It owns +800 vertical market software businesses. It has a data base with over 40,000 businesses that it could prospectively acquire.
Constellation really understands the process of compounding capital. It acquires businesses that yield a lot of cash. It reaps the cash and reinvests it at high rates of return into more businesses. As long as it maintains its strong acquisition pipeline, it should continue to deliver strong results for shareholders.
This stock is not cheap by any means today. However, I have no plans to sell anytime soon.
A software stock with strong network effects
Another tech stock I hope to own for years ahead is Descartes Systems (TSX: DSG). It operates an essential logistics network that enables commerce around the globe. It complements its network with an array of software services that help shippers/transport providers to operate more efficiently and profitably.
With geopolitical disruptions around the globe, shippers need to be nimble. Customers are running to Descartes’s platform to better manage global transport challenges.
It has been growing organically at a high single-digit rate. Once a customer joins the network, they are very unlikely to leave. Consequently, customer churn is very low.
The company has a pristine balance sheet with $320 million in cash. It has made 29 acquisitions since 2015, but it is primed to accelerate its acquisition growth in 2024 and beyond. This stock is persistently expensive. However, with a market cap of only $10 billion, it could still grow substantially from here.
A transport business with levers for value creation
TFI International (TSX: TFII) is another stock I plan on holding for the long term. TFI is one of the largest transportation businesses in Canada and a growing player in the United States. Transportation is a tough industry. However, TFI has found a way to navigate the industry very profitably.
TFI has an exceptional management team. They are dialled in on delivering per-share growth for long-term shareholders, partly because they are also long-term shareholders.
The transport industry in North America is very fragmented. TFI has made hundreds of acquisitions since it was founded. It continues to regularly add businesses that expand its market presence or operating capacity.
TFI is the cheapest of these three stocks. It has several catalysts that could further unlock shareholder value, so I’m happy to keep holding this stock for many years.
