Building a high-quality portfolio is all about diversification. However, with that being said, some of the most important stocks in your portfolio will be your growth stocks. So, although there are plenty of growth stocks to buy on the TSX, it’s essential to look for stocks that don’t just have momentum today but have years of growth potential ahead of them.
The best stocks to find are undoubtedly those you can buy and hold for 10 years or more. These are high-quality businesses with solid operations, proven track records, and strong competitive advantages.
Buying any stock to hold for years is essential to mitigate against short-term market volatility and potential sell-offs. It’s even more important with growth stocks, though, since many tend to trade at premiums and can be more volatile in turbulent times.
So, although there are plenty of high-quality TSX growth stocks to choose from, here are two of the best to buy now and plan to hold for the next decade.
One of the best growth stocks to buy on the TSX
There’s no question that one of the very best growth stocks on the TSX is Dollarama (TSX: DOL), the $37.5 billion discount retailer.
Dollarama’s rapid growth, but more importantly, its consistent growth and proven track record, make it one of the best stocks Canadian investors can buy.
Its business model as a discount retailer with a well-known brand allows it to consistently open more stores and grow its revenue, whether the economy is strong or worsening.
So even though it’s seen a massive boost in sales over the last few years as surging inflation weighed on the economy, it continues to have compelling growth potential in the coming years.
Not only will it continue to see organic growth in Canada and additional store openings, but its 50.1% stake in Dollarcity, a Latin American chain of dollar stores, also offers significant growth potential as well.
Currently, analysts predict Dollarama’s revenue will grow by 8% this year and another 6% next year. More importantly, though, analysts also estimate that Dollarama will see more than 13% growth in normalized earnings per share (EPS) this year as margins improve. Next year is also expected to be impressive, with analysts predicting 11.8% growth in normalized EPS.
Therefore, given its short – and long-term potential – as well as its strong track record of growth (up 780% over the last decade), Dollarama is certainly a stock with years of potential, making it one of the best TSX growth stocks to buy and hold long term.
It’s also worth noting, though, that as one of the best stocks on the TSX, it trades at a growth premium. So not only is it ideal for the long haul, but it’s also essential to buy and hold for years, in order to mitigate against short-term risks and potential volatility.
A high-quality residential REIT trading off its highs
Another top stock to buy now that’s been one of the best growth stocks on the TSX for years is InterRent REIT (TSX: IIP.UN).
InterRent is a residential REIT that had been growing rapidly for years. Over the last few years, though, it’s faced increased headwinds, such as higher inflation pushing up operating costs while higher interest rates are acting as a headwind too.
With inflation subsiding and interest rates now on the decline, there’s a tonne of potential for InterRent to continue on its impressive growth trajectory, and that’s been reflected in its results recently.
For example, in the second quarter of this year, its funds from operations per unit jumped a whopping 17%. Furthermore, its same-property net operating income grew 9.7%, thanks to its average monthly rents climbing 6.8% in the quarter.
It’s also worth noting that InterRent’s debt-to-gross book value is just 37.8%, giving it some room to make acquisitions in the near term, especially as interest rates continue to decline.
Plus, on top of its growth potential, it also pays a distribution to investors, and with the stock trading in the middle of its 52-week range, the yield has climbed to just shy of 3%.
Therefore, while InterRent trades off its high, it’s certainly one of the best TSX growth stocks to buy for the long term.
