If you want to compound investment earnings for long periods (like decades), you need to max out your TFSA (Tax-Free Savings Account). Stocks held in a TFSA are safe from all taxation.
That means your investments and gains can compound without restraint. You are more likely to hit your financial goals faster by using a TFSA. If you are wondering what kind of stocks to hold in a TFSA, here are five top-performing Canadian stocks for the decades ahead.
A transport stock for any TFSA
TFI International (TSX: TFII) has really delivered for long-term shareholders. Its stock is up 320% in the past five years and 688% in the past 10 years. That doesn’t factor in its growing dividend per share either.
TFI is not an exciting business. TFI operates a mix of shipping, logistics, and freight businesses. It has a smart management team of cost-efficient operators. They have also proven wise capital allocators after making 90-plus acquisitions over the past 10 years.
The freight industry is depressed in North America and that is weighing on TFI’s stock. However, that could create some attractive opportunities to add to your TFSA in 2024.
A top real estate stock
Colliers International (TSX: CIGI) is another TFSA stock with some near-term buzz, but long-term potential. It is best known for its global commercial real estate brokerage business. That business has lagged as high interest rates have hampered real estate transaction activity.
However, many don’t recognize over 70% of its earnings now come from recurring revenue businesses. Asset management, property management, and consulting/advisory have become major components at Colliers. This company is very well-positioned, especially if real estate capital markets resume.
This TFSA stock has compounded total returns by a high-teens rate. Its CEO is a major shareholder so incentives to continue to deliver are highly aligned with shareholders.
A software stock with a top-performing parent
Another long-term TFSA stock is Topicus.com (TSXV: TOI). It is a prodigy spin-out of Constellation Software (one of the best-performing tech stocks in Canada). Topicus is a great way to get exposure to a similar business to Constellation, but without having to pay a $3,700 per share price tag.
Topicus acquires niche software businesses across Europe. Given how diverse Europe is, there is a huge market of specialized software businesses it can acquire.
Through a mix of cross-selling and smart product development, Topicus has actually been growing organic revenues even faster than Constellation. It is not the cheapest stock. However, it recently pulled back and could be a good buy if it drops more.
A fast-growing insurance business
Another TFSA stock with long-term upside is Trisura Group (TSX: TSU). It provides specialty insurance products in Canada and the U.S. The risk management solutions provider also has a fronting services business that has grown substantially in the past few years.
This stock is up 450% in the past five years. This was driven by exceptional 40% compounded earnings per share growth. It has a strong return on equity, a low combined ratio, and good potential to keep growing. For a small-cap stock that could keep growing for years, Trisura is an intriguing bet today.
An anchor stock for a TFSA
Canadian Pacific Railway (TSX: CP) is a nice anchor for a TFSA. Railways are very resilient businesses over the long term. After its acquisition of Kansas City Southern, CP has one of the best rail networks in North America. It is the only single network that spans across Mexico, the U.S., and Canada.
This provides CP many levers for growth in the coming years. Management is aiming to double earnings in the next three to four years. It is a pricier railroad in terms of valuation. However, if the company can hit its growth targets, it will be worth holding in the years ahead.
