“The stock market is a device to transfer money from the impatient to the patient”. Warren Buffet’s quote highlights the importance of having a long-term mindset when investing. With this in mind, let’s look at two TSX stocks to buy and hold with patience.
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Well Health Technologies: A rapidly growing TSX stock
The first TSX stock on my list of stocks to buy and hold is Well Health Technologies Corp. (TSX:WELL).
I’ve been following the company’s success through the years, and its growth has been nothing short of impressive. Well Health went public in 2017. In 2023, only six years later, the company posted annual revenue of $776 million and net income of $16.6 million.
Looking ahead, management expects fiscal 2024 revenue of between $960 to $980 million, for a growth rate of between 23.7% and 26.3%. EPS is expected to come in at $0.17, compared to a net loss in 2023. Furthermore, in the next five years, management expects more rapid growth to be fueled by the continued demand driven by the benefits of digitizing the healthcare system.
Yet, Well Health stock continues to be stuck below $5 on the TSX. While this is understandable given the fact that Well Health is still a company in its infancy, this appears undervalued if we take a longer-term perspective.
For example, the growth in revenue continues at a strong pace. Also, earnings and cash flow growth are accelerating. And shareholders will see an increasing piece of this, as share-based compensation is falling and share buybacks are increasing. This new era of sustained cash flow growth and dilution reversal is what continues to drive my optimistic view on Well Health stock.
Ballard Power
The next stock that I’d like to single out here is a riskier proposition. Ballard Power Systems Inc. (TSX:BLDP) has been around for decades, but it has struggled to actually make money the whole time. While this is not a good sign, I continue to be impressed with Ballard’s significant potential.
The opportunity lies in two areas: the first is the potential of fuel cells to replace gasoline engines in heavy-duty motive vehicles. This means buses, trains, trucks, and marine vehicles. While most of these verticals are in very early stages, the bus vertical is growing rapidly. In fact, in Ballard’s latest quarter, revenue from the bus segment increased 206% to $8.9 million.
The second is in the opportunity for fuel cells to power data centres and other stationary centres. In the first quarter, Ballard’s stationary vertical saw a 48% increase in revenue to $3.7 million. While this segment is still small, the potential is growing. Just this week, Ballard announced a strategic technology partnership with Vertiv, a global provider of digital infrastructure. The focus of this partnership is backup power applications for data centres and critical infrastructure.
But to get a fuller picture of the rapidly emerging opportunity, we have to look at backlog and orders. In the quarter, backlog increased 38% sequentially to $180.5 million, with record new orders of $130 million in the last two quarters.
As of the end of the first quarter, Ballard has approximately 1,200 fuel cell engine orders in Europe and North America – management sees this tripling in the next 2 to 3 years. There are currently approximately 600 fuel cell buses in Europe and North America – management sees this increasing to the thousands in the next 3 to 4 years.
The bottom line
A long-term mindset is so important because it can help us avoid getting distracted by short-term noise. This noise comes in many forms and has been known to cause investors to make money-losing decisions, negatively affecting returns and wealth.
The TSX stocks to buy that I discussed in this article have their fair share of short-term noise. Those of us who ignore this noise and stick with these stocks for the next 10 years will, in my view, benefit from significant shareholder wealth creation.
