The smartest stock investments are those you can just buy and hold for years. Why? If you have a company that can persistently compound its earnings per share (and your hard-earned capital), you don’t want to switch in and out.
You want that capital to compound upon itself over and over. The less you do, the better the outcome. If the company keeps performing, the longer you hold and the bigger the gain.
If you are looking for companies that have done this and can do this, here are three smart TSX stocks to buy with $2,000.
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A top compounder on the TSX
Constellation Software (TSX: CSU) stock trades for $4,300 today. Certainly, that is more than double the $2,000 you might have to invest. The great news is that many brokerages now allow the purchase of fractional shares, so you can add highly priced stocks at a price you can afford.
Constellation stock is up 1,330% in the past 10 years and 23,635% since its initial public offering (IPO). The company has been an exceptional compounder of capital.
Its formula of buying niche (and often cheap) software companies, employing best practices, reaping strong cash flows, and reinvesting into more businesses is tried and proven.
Now that the company is worth over $91 billion, it needs to scale its acquisition strategy. It is doing this by spinning out more specialized/focused parts of its business. Already, that strategy has generated great shareholder returns. An investor can expect more of these spin-outs in the years ahead.
Today, the mothership Constellation is the cheapest between Topicus.com and Lumine Group (its two spin-out companies). This stock is not a bargain. However, if it can sustain its high-teens growth posture and strong returns on invested capital, it is not ridiculously expensive today either.
A small-cap tech stock in the early innings
If you are looking for another tech stock that is in the earlier stages of its growth trajectory, VitalHub (TSX: VHI) is an interesting stock. VitalHub is a specialized software provider for the healthcare industry.
The healthcare industry is extremely inefficient and constantly strained for resources. VitalHub’s software services help healthcare organizations save money, better manage operations, and improve patient outcomes. There is a steady and growing demand for its offerings.
The company has been growing nicely and organically. It has a strong balance sheet to acquire businesses that expand its service and geographic range.
This stock is not cheap after it has risen 147% in 2024. However, it is a great stock to add on any major dips. If it can sustain its high double-digit growth in the long term, the stock will pay off nicely.
An under followed insurance stock
Trisura Group (TSX: TSU) is an under-the-radar compounder that is your value pick for today. Trisura is a specialty insurance provider in Canada and the United States. It also has an insurance fronting business that has been gaining good traction.
This company has delivered good returns for long-term shareholders. Its stock is up over 400% in the past five years. Due to its specialization in niche insurance products, it can earn above-average returns on equity.
Right now, analysts believe it can earn a mid-teens level of growth for the next few years ahead. The stock only trades for 14 times earnings. On a growth to value basis, it looks attractive. If it can hit its mark in the next few quarters, the stock could really start to move forward.
