Whenever you buy a TSX stock, you are making a prediction about its future success. The problem is that the stock market can be incredibly volatile and irrational at times. As a result, a long-term prediction/investment in a stock can temporarily be proved wrong by short-term stock market volatility.
That is why investors are wise to take a long-term approach to investing. Prior to buying a stock, complete a thorough due-diligence study of its business.
Make sure the companies you are buying are profitable and generate good cash flows. Also, check to see that they have strong balance sheets, smart managers, good-quality products, and well-thought-out strategies. Factoring these elements can help eliminate a lot of the long-term risk in owning stocks.
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You can’t control the market, but you can control your portfolio
You can’t control the near-term fluctuations of a stock. However, you can choose what stocks you own, and you can control your impulses to buy/sell.
That is why a long-term prediction to invest in a stock requires some patience and resolve. However, it can really pay off. Most stocks that have 100X an investor’s money have taken several decades to achieve that return.
If you are looking for TSX stocks that could beat the market in the years ahead, here are two that have delivered (and should continue to do so in the future).
A TSX financial stock outpacing the market
goeasy (TSX:GSY) has quietly been one of the best-performing TSX stocks over the past decade. Since 2014, its stock has delivered a 1,125% total return! That is a 28.5% compounded annual growth rate!
goeasy provides specialized loans to non-prime consumers. The major banks in Canada have exited this segment. goeasy has done a great job building out both a retail and online network for advancing loans. As a result, it has a strong brand and a recurring base of customers.
Every year, goeasy adds new services to its product mix. This has allowed it to grow earnings per share steadily by around 15-20% a year. It just announced a credit card product. New banking services could certainly provide a new element of expansion in the coming years.
This stock is up 14% in 2024, so it has already outpaced the market. With its 2.66% dividend yield and solid trajectory, it should keep delivering market-leading returns ahead.
A software stock with a long growth horizon
Most Canadians are not likely familiar with Topicus.com (TSXV:TOI). However, they would likely be familiar with its high-performing parent organization, Constellation Software. Constellation is up 1,469% in the past 10 years. Topicus stock is up 83% since its initial public offering (IPO) in early 2021.
Right now, Topicus operates wholly in Europe. It is completing a similar niche software acquisition strategy as Constellation.
Europe is an attractive market because of its diverse mix of countries, governments, industries, languages, and regulations. There are thousands of prospective businesses it could acquire, so mergers and acquisition growth should not be an issue.
Interestingly, Topicus is growing organically at a faster rate than Constellation. Part of its business is very good at developing software. Likewise, strong inflation has fuelled strong pricing.
Topicus is not a cheap stock by any means. However, it has recently pulled back. Any further weakness could be a great time to add the stock for a longer-term hold.
