Partnering in Canadian stocks with strong management teams is a great way to build wealth over years and decades. Strong management is a key hallmark that helps define a quality stock.
Partner with smart managers for long-term gains
A wise management team can take a good business and make it great. Likewise, they can help prevent a lot of unnecessary risk by prudently managing the balance sheet and the business overall.
The management team is like the captain of the ship. They navigate the company to its destination and make thoughtful decisions to both protect and propel the business forward.
If you want to get richer, you want to partner with Canada’s top executive teams. Here are three Canadian businesses worth buying and holding alongside their highly invested management teams.
A top Canadian software stock
Constellation Software (TSX: CSU) has been one of the best long-term stocks to hold. This Canadian stock is up 23,538% since it hit the stock market in 2006! Its chief executive officer (CEO), Mark Leonard, founded the business when he saw an opportunity to consolidate vertical market software businesses around the world.
While Mr. Leonard is incredibly private, much of his investment ideology can be found in the company’s early annual letters. His supreme focus on delivering high returns on invested capital has enabled the stock to rapidly compound over the years.
Today, Constellation is made up of a group of very thoughtful executives who manage its companies across the world. Constellation has nearly 1,000 software businesses in its portfolio. Yet, its potential acquisition market is many times that number.
With a market cap of $91 billion, the law of large numbers might dampen its long-term returns from the past. However, it still has substantial opportunities to grow at a high-teens/low-20% rate. If you want a top business with a top management platform, you aren’t going to find a better bet than Constellation stock in Canada.
A top real estate stock
Another Canadian stock with a top CEO/founder is Colliers International Group (TSX: CIGI). It has grown to become one of the largest commercial real estate brokerage and real estate services companies in the world. The stock has delivered high teens compounded returns over the past two decades.
Colliers is led by CEO, Jay Hennick, who also built the FirstService property management empire. Mr. Hennick owns a ~13% stake in each business. Like Constellation, he has used a smart acquisition strategy to consolidate brokerage and services businesses globally.
Commercial real estate brokerage can be cyclical, so Colliers has focused on diversifying into property management, engineering, project management, lending, and asset management. Recurring earnings now make up over 70% of its income. As this segment grows, its stock valuation should re-rate higher. That should help promote continued strong returns for long-term shareholders.
A leading Canadian transport stock
TFI International (TSX: TFII) is another long-term buy-and-hold stock. While it operates in a boring industry (transportation and freight), it has earned a massive 795% total return in the past 10 years. Under the leadership of its longstanding CEO, Alain Bedard, the company has flourished.
Mr. Bedard has focused the company on a low-cost operating model that has helped it earn industry-leading returns on investment. He has likewise used a smart acquisition strategy to expand by geography and by service category.
While the freight industry is currently in a tough market, TFI has plenty of opportunities to keep lowering costs, right-size its distribution footprint, and unlock shareholder value (share buybacks, spinouts, etc.). As long as Mr. Bedard is at the helm, this company should keep delivering for long-term, patient shareholders.
