One of the biggest mistakes new investors make is focusing too much on trying to find the cheapest stocks on the market rather than looking for the very best stocks on the TSX to buy now.
Don’t get me wrong, when you buy stocks that are undervalued, you can set yourself up for significant gains. However, buying the best stocks with years of growth potential is often better than just looking for the cheapest stocks on the market, regardless of how expensive the top stocks are.
This is because cheap stocks tend to be cheap for a reason. They could be stocks in declining industries or struggling businesses with higher-than-normal risk.
Conversely, high-quality businesses typically have years or even decades of significant growth potential. So, while they may not be that cheap today, the potential gains they can earn you over the long term far exceed the short-term gains you could make buying a cheap stock and hoping it rallies back to fair value.
For example, Dollarama is such an impressive stock that it has hardly ever traded cheaply. Yet, year after year, it earns investors massive returns. In fact, over the last decade, investors have earned an ultra-impressive total return of 786% or a compounded annual growth rate (CAGR) of 24.4%.
So, with that in mind, if you’re looking for some of the top Canadian stocks to buy now, here are three of the best.
A top real estate stock with significant growth potential that’s trading ultra-cheap
One of the best Canadian stocks to buy now, which benefits from both years of growth potential and an undervalued price today, is Granite REIT (TSX:GRT.UN).
Granite is an industrial REIT with significant growth potential over the long haul, especially as the economy continues to shift and is influenced by rapid and consistent innovation.
As e-commerce continues to gain popularity and shipping times continue to drop, more and more consumers are electing to buy their products online, and retailers are responding.
This is leading to less demand for retail space for many companies. However, it’s also leading to more demand for industrial space, such as warehouses, in order to store inventory, which used to be stored in their brick-and-mortar stores.
It’s becoming increasingly important for companies to have an efficient distribution centre that can help serve the entire country or region in which they are located, giving Granite a tonne of growth potential over the coming years.
Not only is Granite seeing more revenue from its existing industrial properties as leases turnover, but it also has a tonne of demand for new warehouse space that it can build.
Plus, with Granite Trading at a forward price-to-adjusted-funds-from-operations (P/AFFO) ratio of just 13.7 times, well below its five-year average of 19.4 times, it’s easily one of the best Canadian stocks to buy right now.
Two of the best defensive growth stocks to buy right now
In addition to Granite, two more of the best stocks to buy now are Brookfield Infrastructure Partners (TSX:BIP.UN) and GFL Environmental (TSX:GFL), especially in today’s uncertain economic environment.
Owning defensive stocks is a great way to shore up your portfolio and protect the hard-earned capital that you’ve put to work. However, defensive stocks often grow at a slower pace than non-defensive stocks. With GFL and Brookfield, though, investors can get the best of both worlds.
For example, Brookfield owns essential infrastructure assets all over the world. So even if there is a slowdown in the global economy, Brookfield’s operations are so resilient that it shouldn’t expect much of an impact on its revenues.
Plus, it’s run like a growth stock, constantly recycling capital by selling off mature assets at premium valuations and reinvesting that cash into new or undervalued opportunities.
Meanwhile, GFL provides essential waste management services including collection, industrial cleaning services, landfill operations and more. These are services that we need no matter how well the economy is doing or how badly it’s being impacted.
Furthermore, for years, it has grown rapidly by acquisition, leading to significant organic growth while GFL’s operations expand and it focuses on scaling costs.
Therefore, if you’re looking for some of the best stocks to buy now, both GFL and Brookfield are high-quality companies, especially in the current economic environment.
