The TFSA (Tax-Free Savings Account) is where you want to hold stocks for the long term. Why? Simply, you don’t want to pay any tax on your big gainers. You can substantially increase your long-term returns by keeping your gains safe from the tax man.
You can also increase returns by picking stocks in businesses that can consistently compound their earnings and cash flows. The longer you hold a high-quality stock, the higher your chances increase of earning a substantial multiplication of your capital. If you are looking for stocks to hold forever in your TFSA, here are four to buy today.
A top software stock in Canada
Constellation Software (TSX: CSU) needs to frontline a forever-hold list for a TFSA. It’s hard to argue with its record of creating shareholder value. Its stock is up 1,423% in the past decade and 23,071% since inception!
Those returns don’t include its spinouts of Topicus.com and Lumine Group either (both of which could be substantial compounders in their own right).
When you buy Constellation, you actually buy close to 1,000 specialized software businesses around the globe. These businesses generate a lot of cash, earn high recurring revenues, and are economically resilient.
Constellation still has a large acquisition funnel that could sustain solid high-teens to mid-20% growth. Likewise, further spinouts are likely. It isn’t the cheapest stock, but it has never failed to be an attractive long-term buy.
An industrial compounder
Another up-and-coming compounder is TerraVest Industries (TSX: TVK). Its stock is up 116% in 2024 alone. Its stock is up 1,400% in the past 10 years. Despite this impressive run, it only has a market cap of $1.8 billion. That suggests it still has plenty of room to be significantly larger.
There is nothing flashy about this business. It is a conglomerate of manufacturing, industrial, and energy businesses. The secret sauce is management’s ability to buy cheap companies, use scale to reduce its cost base/increase sales, and re-invest its ample cash flows into cheaper businesses.
Like Constellation, TerraVest has a very intelligent, highly invested management team. It has a significant market to keep consolidating, so returns could keep coming in the years ahead.
Two transport stocks for long-term TFSA hold
Two other stocks to buy and hold in a TFSA for the long haul are transport-related. TFI International (TSX: TFII) has been an excellent compounder for years. Its stock is up 628% in the past decade.
The company has been a smart serial acquirer. It has consolidated a mix of mom-and-pop freight operators and larger distribution networks.
The business is focused as a premium low-cost operator. It generates a lot of cash. It also has ample room to improve operating and profit metrics in the coming years.
Canadian Pacific Kansas City (TSX: CP) has likewise been one of the best in its field. Despite being one of the smallest North American railways, it has delivered a solid 176% return in the past 10 years.
This may not be the fastest-growing stock on the list, but it provides an attractive risk/reward profile. The rails are excellent long-term businesses. CPKC just became bigger and better after it added Kansas City Southern to its network.
The North America-wide network should provide industry-leading growth for many years. With a strong management team and an excellent set of assets, this company is a great long-term anchor in a TFSA.
