Long-term investing is one of the most passive ways to invest in stocks. Certainly, before you buy a stock, you need to do some upfront research. You need to understand its competitive advantages, the quality of its management, the strength of its products, and its ability to generate long-term excess cash flows and earnings.
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Long-term investing is passive in nature
However, once you put in the work and buy the stock, there is not much else to do. Sure, it is wise to follow up on quarterly and annual earnings. If your thesis holds correct, the smartest thing to do is just sit on your hands. That is especially true when the stock market is volatile.
If the stock is as good as when you first analyzed it, your positive returns will iron out in the end. If you are looking for some ideas on where to invest for the next decade, here are three stocks to buy today.
Constellation Software: A top Canadian growth stock
Constellation Software (TSX: CSU) has been one of the best Canadian investments to hold over the past few decades. Its stock is up 1,346% in that time.
Constellation has a unique strategy. It buys very niche software businesses all over the world. These are not flashy businesses.
They tend to cater to a very specific area or group of customers. However, there are many of them that Constellation can acquire. Also, it can generally buy them at cheap valuations.
Constellation turns the businesses into cash machines. It then reinvests the cash into more businesses. Today, it owns over 900 software businesses. There are tens of thousands of vertical market software businesses in the world. It has no shortage of opportunities.
Given its $85 billion market cap, its 32% compounded annual rate of return will likely trend downward. However, even if it can deliver half that rate, shareholders will still do very well over the next 10 years.
VitalHub: An up-and-coming software provider
A software stock with an intriguing long-term runway is VitalHub (TSX: VHI). With a market cap of $425 million, it is only a fraction of the size of Constellation. However, if you want a stock with a long runway of growth, this is one to look at.
VitalHub provides planning, operations, and patient support software to the healthcare industry. It operates around the world. It is using smart acquisitions to expand its product portfolio and grow its geographic reach.
Healthcare systems are increasingly constrained by funding and staffing. VitalHub’s products help alleviate these stresses while also improving patient outcomes. It has been growing profitably by an approximately 25% rate. It could carry on this growth trajectory for many years to come.
TFI International: A shipping stock with a great future
TFI International (TSX: TFII) is an ideal long-term stock. Its business is not exciting. It operates a conglomerate of shipping and freight companies across North America.
However, it is the way it runs its business that is really impressive. Firstly, it has a longstanding chief executive officer who is also a major shareholder. His incentives are heavily aligned with shareholders.
Secondly, it is an extremely focused low-cost operator. It only focuses on profitable business. As a result, it earns high returns on its invested capital. It also generates a lot of spare cash.
TFI deploys this cash into a thoughtful acquisition strategy. It has made over 90 acquisitions in the past 10-15 years. This has delivered an approximate 24% compounded annual total returns over the past decade. It could easily do the same in the coming decade.
