Investing in equity markets for a longer horizon is an excellent strategy, as investors can benefit from the power of compounding while staying clear of short-term volatility. However, investors should be cautious when choosing stocks, as not all stocks deliver healthy returns. They should invest in stocks with solid fundaments and healthy growth prospects. Here are my three top long-term picks.
Celestica
Celestica (TSX:CLS) supports a wide range of customers by providing insight at every stage of product development. Supported by its solid first-quarter performance and exposure to high-growth sectors, such as EMS (electronic manufacturing services) and artificial intelligence (AI), the company continues to witness healthy buying this year, with its stock price rising by 97%.
Despite its solid returns, I believe the uptrend in Celestica will continue. The increased usage of generative AI applications has prompted chip manufacturers to raise their capital investments, thus creating multi-year growth potential for the company. Besides, the company has also signed an agreement to acquire NCS Global Services, strengthening its strategic capabilities in the IT sector while expanding its geographic footprint. Further, its diversified customer base, new product launches, and an attractive NTM (next 12 months) price-to-sales multiple of 0.7 make it an enticing long-term buy.
goeasy
goeasy (TSX:GSY) is a subprime lender that has grown its revenue and adjusted EPS (earnings per share) at an annualized rate of 19% and 28.6%, respectively, for the last 10 years. Despite these solid performances, the company has only acquired around 2% of the $218 billion Canadian subprime market. So, its scope for expansion looks substantial.
Meanwhile, the subprime lender is witnessing stable credit and payment performance, with its net charge-off rate at 9.1%, within its guidance of 8.5-10.5%. Besides, the company’s new product offerings and delivery channels, growing cross-selling opportunities, and expansion of its point-of-sales business could boost its topline in the coming years.
Further, goeasy has enhanced underwriting and income verification processes, tightened credit tolerance by increasing required credit criteria, and adopted next-gen credit models, which could lower its default rate. The company could also benefit from improving economic activities amid easing inflation and lowering interest rates. Besides, its consistent dividend growth and an attractive NTM price-to-earnings multiple of 10.6 make it an ideal buy for long-term investors.
Dollarama
Another top Canadian stock offering impressive growth potential is Dollarama (TSX:DOL), a discounted Canadian retailer with an extensive presence nationwide. It has adopted a superior direct-sourcing model, empowering it with higher bargaining power while eliminating intermediatory expenses. So, the company offers a wide range of products at attractive prices, thus enjoying healthy same-store sales even during a challenging environment.
Further, the Canadian retailer plans to increase its store count by 60-70 units annually to reach 2,000 by 2031. Given its capital-efficient business model and quick sales ramp-up, these expansions could boost its top and bottom lines. Besides, the company raised its stake in Dollarcity by 10% to 60.1%. Also, Dollarcity has raised its long-term guidance and expects to increase its store count to 1,050 by 2031. So, Dollarama’s outlook looks healthy. Further, the company has raised its dividends consistently since 2011.
