Buy-and-hold stock investing may not be the flashiest method, but it can be very successful. It is a human tendency to relate more activity to better results. However, that is rarely the case with investing.
Some of the greatest investors in the world have made their fortune by buying quality businesses and holding them for decades.
The more you trade stocks, the more expenses you create. Likewise, you constantly must re-evaluate the opportunity cost between your current holdings, those you wish to sell, and new prospective additions.
The point is, if you hold a high-quality company that can consistently compound capital, the best thing you can do is to let it be. The more time an investment compounds the better your returns can be.
If you are looking for some ideas for the next 10 to 15 years, here are two cheap stocks to stash in a tax-advantaged account like a Tax-Free Savings Account (TFSA).
A transport stock with exceptional returns
TFI International (TSX: TFII) has been an excellent compounder of shareholder capital for years. Its stock is up 372% in the past five years and 675% over the past 10 years. I think many investors would be shocked that TFI is a trucking company and not a flashy tech company.
TFI operates less-than-truckload, truckload, logistics, and courier businesses across Canada and the U.S. While it has the largest shipping company in Canada, over two-thirds of its revenue come from the U.S.
The company has traditionally grown by consolidating small transport operators. TFI has made 129 acquisitions since 2008. It can buy these businesses for very good valuations. It has the scale and operating expertise to turn them into cash flow machines.
TFI is both a great capital allocator and a strong business operator. It has plenty of room to keep improving its subsidiaries. Its management team is highly invested, so its incentives to deliver strong returns are very aligned with shareholders.
Shipping in North America has been in a recession for the past two years. TFI has performed well through it, but it is not exempt from the challenging environment. However, it means you can pick the stock up at a fair 13 times free cash flows today. Take a long-term view, and this stock could benefit from solid growth and a nice valuation re-rating.
A real estate company ready for a bounce-back
Colliers International (TSX: CIGI) is a quality compounder stock that trades below many investors’ radar. It is known around the world for its commercial real estate brokerage brand. However, many are not aware of its massive business transformation in the past 10 years.
Today, over 70% of Colliers’ income comes from recurring service revenues. It has growing businesses in real estate management, project management, consulting, engineering, finance, and asset management. Colliers just announced a large engineering acquisition in Canada.
While its real estate transaction business has been weak due to elevated interest rates. Its other businesses have held their own. The Bank of Canada recently cut interest rates by 0.25%. That could help restart the commercial real estate transaction market again.
Colliers has compounded shareholder returns by a high-teens rate for more than two decades. You can buy this stock for about 17 times earnings, which is reasonable given its long-term growth rate is about the same. If its real estate business recovers, it could really see earnings explode in the years ahead.
