TFSA Growth 101: 1 Top Stock to Buy and Hold for the Next Decade

Constellation Software (TSX:CSU) stock is looking way too undervalued following its latest mild pullback off highs.

| More on:

Younger Tax-Free Savings Account (TFSA) investors may wish to pursue growth stocks while time is still on their side. Indeed, it’s never a bad idea to reach for the defensive dividend stocks, especially if you’re a tad rattled by big swings in markets. Just because Canadian stocks (the TSX Index specifically) are flirting with new highs again after a brief dip doesn’t mean you shouldn’t be ready to keep on rolling with the volatility. There will always be events that can cause us to fall into a bit of a panic.

Most of the time, making panic-driven decisions (think selling at a loss) is a mistake. Though recent swings in markets have been major, I’d encourage investors to think back to the 2020 stock market crash caused by a viral outbreak that eventually evolved into a worldwide pandemic. Yes, pandemics are scary, but selling after the market crash proved incredibly ill-timed.

Don’t panic when the market sells off violently!

Those who bought on the panic walked away with very sharp gains. And while it’s unlikely we’ll have another such steep V-shaped move in markets, I still think that it makes sense to be just a bit more bullish when most others around you become bearish seemingly overnight on events whose magnitude is uncertain.

More recently, a surprise Japanese rate hike caused stocks to take a nosedive. It was really tough to know what was happening in the heat of the selloff. What exactly is a Japanese currency carry trade? And could the associated selling from its deterioration lead to some sort of market-wide contagion?

It was hard to tell. But, as it turned out, there wasn’t as much for investors to get worried over. Eventually, the stock plunge corrected to the upside and it was back to bargain-hunting for investors who were interested in putting cash to work on weakness.

Though I have no idea if the recent V-shaped bounce from the August selloff will reverse course next month, I see value in the following name. Perhaps it makes sense to dollar-cost average into the name over time, so you’re not shocked by a potential revisitation of August lows in September or at some point in the fourth quarter.

Constellation Software

Constellation Software (TSX:CSU) is a fantastic company to pursue whenever shares slip into a correction. Though the 11% correction has now been reduced to a 5.5% dip (around half of the losses from July and August recouped), I still see value in the name at nearly $4,200 per share.

The company has continued to make very smart deals in the Canadian software scene. In many ways, it’s a growth-by-acquisition type of firm that can create value steadily over time by putting its excess cash to work. In the last quarter, Constellation saw revenues surge by 21%. That’s an incredible jump.

More growth could be ahead as the firm looks to make the most of recent deals. For Canadian investors seeking growth in the smaller side of software, CSU stock is a top pick in the long run. Over the past decade, shares have risen over 1,445%, a meteoric rise.

Though such gains seem highly unlikely for the next decade, I’d not be surprised if the firm eventually appreciates such that its valuation eclipses $300 billion within the next five to 10 years. It’s a well-run company with a growth model that’s not just respectable but sustainable.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

More on Investing

ETF chart stocks
Investing

Here Are My 2 Favourite ETFs for 2025

These are the ETFs I'll be eyeballing in the New Year.

Read more »

money goes up and down in balance
Dividend Stocks

This 6% Dividend Stock Is My Top Pick for Immediate Income

This Canadian stock has resilient business model, solid dividend payment and growth history, and a well-protected yield of over 6%.

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

Outlook for Cenovus Energy Stock in 2025

A large-cap energy stock and TSX30 winner is a screaming buy for its bright business outlook and visible growth potential.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Stock Market

CRA: Here’s the TFSA Contribution Limit for 2025

The TFSA is a tax-sheltered account that allows you to hold diversified asset classes at a low cost.

Read more »

Hourglass and stock price chart
Tech Stocks

1 Canadian Stock Ready to Surge Into 2025

There is a lot of uncertainty about the market in general as we move closer to the following year, but…

Read more »

think thought consider
Stock Market

Billionaires Are Selling Apple Stock and Picking up This TSX Stock Instead

Billionaires like Warren Buffett continue to trim stakes in Apple stock, with others picking up this long-term stock instead.

Read more »

ways to boost income
Dividend Stocks

1 Excellent TSX Dividend Stock, Down 25%, to Buy and Hold for the Long Term

Down 25% from all-time highs, Tourmaline Oil is a TSX dividend stock that offers you a tasty yield of 5%…

Read more »

canadian energy oil
Energy Stocks

Is Baytex Energy Stock a Good Buy?

Baytex just hit a 12-month low. Is the stock now oversold?

Read more »