TFSA: 3 Canadian Stocks to Hold for a Lifetime

The TFSA is the perfect place to compound wealth. Here are 3 top Canadian stocks to hold for a lifetime.

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The Tax-Free Savings Account (TFSA) is a perfect place to grow substantial wealth over long periods. Being safe from tax implications means you can invest, compound your capital, and not worry about the government taking its share. This is particularly important in an era in which governments are looking to offset big deficit spending by raising taxes on investors.

If you are looking for some high-end TFSA stocks to hold over a lifetime, here are quality Canadian businesses that could be good buys today.

A tech stock for any TFSA

It would be wise to firstly include Constellation Software (TSX:CSU) or one of its spin-outs (Topicus.com or Lumine) at the top of this TFSA portfolio list. Constellation has consistently been one of the best performing stocks in Canada. Over the past five years, it has compounded annual returns by around 25%.

Constellation has an exceptional investment platform. While it has over 1,000 vertical market software businesses in its portfolio, it has more than 50,000 potential acquisition targets around the world. That means this company could continue to become much, much larger.

Constellation is not the cheapest stock on a relative or absolute basis. Its stock trades for $3,680 per share. CSU trades for 23 times forward free cash flow.

That is certainly not the cheapest it has been. However, if it can continue to compound returns at 20 to 25% a year for several years to come, it could be a fair valuation to pay now.

A transport stock for a long-term TFSA hold

If you want longevity, Canadian Pacific Railway (TSX:CP) is the perfect stock for a lifetime hold. Canadian Pacific Railway was incorporated in 1881 and it has operated across Canada since 1889.

Rail continues to be an essential means to transport bulk goods across North America. Canadian Pacific is truly essential to the North American economy.

After its acquisition of Kansas City Southern, CP has the only rail network that traverses Canada, the United States, and Mexico. With this network and infrastructure, CP sees significant opportunities to grow its business.

In fact, it expects to double its earnings per share over the next four to five years. It is not the cheapest railroad stock, but its growth opportunities make up for the fact.

An industrial stock with excellent capital deployment

TerraVest Industries (TSX:TVK) is not the typical compounder to own in a TFSA. It does not operate in a sector or industry with amazing fundamentals. It operates a mix of industrial businesses that include energy services, energy transportation, energy storage, and heating products.

None of these are exciting businesses. The key is TerraVest’s smart operating capacity and good capital allocation. It can buy these businesses at very attractive valuations.

With economies of scale, TerraVest can improve costs and cross market products/services. By improving sales and cash flows, it can quickly make those investments very accretive. With a solid balance sheet, there is no shortage of companies it can acquire.

The stock is up 78% in 2024 and 478% in the past five years. TFSA investors may want to wait for a pullback and slowly build a position for a long-term hold.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robin Brown has positions in Constellation Software, Lumine Group, TerraVest Industries, and Topicus.com. The Motley Fool has positions in and recommends Topicus.com. The Motley Fool recommends Canadian Pacific Kansas City, Constellation Software, Lumine Group, and TerraVest Industries. The Motley Fool has a disclosure policy.

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