One of the best-known strategies for putting your hard-earned money back to work is investing for the long term. That means finding the best stocks on the TSX with years of potential and buying them to hold for decades to come.
It’s not always super easy or straightforward to find high-quality stocks, especially if you’re consistently trying to find the best stocks to buy year in and year out.
Not only is it extremely difficult to predict what may happen in the economy, which can have a significant impact on a company’s ability to grow profitability year in and year out, but it’s also difficult to predict investor sentiment and how the market environment may evolve week to week and month to month.
For this reason, it’s far easier to find high-quality stocks that can consistently grow their operations year in and year out and buy them for the long haul. Not only does it mean you need to find a lot fewer stocks to buy, you can buy and hold one stock for decades to come.
However, it also helps you to mitigate against short-term volatility. If you buy a stock you’re only planning to hold for a few months and the next day it drops 10%, you’re likely going to lose money on that investment.
However, if you buy a stock you’re planning to hold for 20 years and it loses 10% the next day, you have a lot longer of an opportunity to earn those losses back, and you could actually use that short-term pullback to buy more shares.
So with that in mind, here’s why I continue to buy Brookfield Infrastructure Partners (TSX:BIP.UN), and why it’s one of the best long-term investments on the TSX.
Brookfield is an ideal stock for all market environments
When it comes to buying stocks, the majority of companies typically have certain environments in which they underperform their peers.
For example, growth stocks with higher volatility can lose significant value during times of turmoil when defensive stocks thrive. On the other hand, defensive stocks will typically grow slower when the market is rallying rapidly, significantly underperforming high-quality growth stocks.
Brookfield, though, has qualities of both. As a company that owns essential infrastructure assets, with roughly 70% of its revenue indexed to inflation, it can still thrive in a weakening economic environment and is highly recession-resistant.
However, because it also operates as a growth stock and can take advantage of low interest rates in times of economic expansion to recycle capital and expand its portfolio, Brookfield can also grow rapidly and benefit when the market is in the midst of a major rally.
So, its combination of high-quality and defensive assets mixed with its strategy of consistently recycling capital and investing in growth makes it one of the best stocks to buy and hold for decades.
Brookfield’s impressive management team is a key reason it’s one of the top TSX stocks to buy and hold for the long haul
It’s not enough just to have a growth strategy; you also need to execute that strategy to become a top TSX stock, and Brookfield has done that time and again.
Throughout the last few years, it’s remained robust due to its revenue being indexed to inflation. Plus, it continues to grow its operations rapidly due to its consistent investments in industries with significant growth potential, such as its acquisition of telecom towers and data centres.
Furthermore, Brookfield knows how to take advantage of low interest rates and its impressive fundraising power to gain the capital necessary to consistently expand its portfolio.
All of this leads to both significant capital gains potential and a constantly growing distribution. In fact, Brookfield’s stated goal is to increase its dividend by 5% to 9% annually over the long haul.
That means it recognizes it may not achieve this growth every year, and it won’t sacrifice future growth just to raise its distribution in a challenging environment. Instead, its target is to average 5% to 9% over the long haul, which is much easier and more sustainable to achieve.
That’s why I keep buying shares of Brookfield Infrastructure and why it’s one of the best TSX stocks to buy and hold long term.
