Long-term investing is an excellent strategy, as investors can benefit from the power of compounding while shielding against short-term volatility. However, investors should be cautious while choosing stocks. They should look for companies with solid underlying business and healthy growth prospects to earn superior returns in the long run. Against this backdrop, here are my three top picks you can buy and hold for the next decade.
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Dollarama
Dollarama (TSX:DOL) is a discount retailer offering a wide range of products at attractive prices through its superior direct-sourcing model and efficient logistics. So, it enjoys healthy same-store sales even during a challenging macro environment, thus delivering consistent financials. Over the previous 13 years, the company has grown its revenue and net income at an annualized rate of 11.5% and 18%, respectively.
Continuing its uptrend, Dollarama has posted revenue growth of 8% in the first six months of this fiscal, while its net income has increased by 17.9%. These healthy performances have increased the company’s stock price, which is trading 56% higher this year. Given its healthy growth prospects, I expect the uptrend to continue. The company has plans to open 417 new stores over the next six years, expanding its store count to 2,000 by the end of fiscal 2031. Given its capital-efficient growth-oriented model and lean operation, these expansions could boost its top and bottom lines.
Moreover, Dollarama also owns a 60.1% stake in Dollarcity, which has a solid presence in Latin America. Dollarcity, which currently owns 570 stores, plans to add 480 stores over the next six years to increase its store count to 1,050. Moreover, Dollarama owns an option to increase its stake in Dollarcity by 9.9%. Given these growth prospects, I expect Dollarama to deliver superior returns in the long run.
Celestica
Celestica (TSX:CLS) is another stock that offers excellent buying opportunities for long-term investors due to its exposure to the high-growth artificial intelligence (AI) sector. The company has delivered an impressive return of over 200% this year amid solid quarterly performances and the raising of its 2024 guidance. Besides, the company’s management has stated that it has received solid demand signals from its large customers for 2025.
Moreover, Celestica continues to launch new products (switches and storage controllers) that could meet the high-bandwidth needs of AI/ML (machine learning) data centres. Besides, the company recently formed a strategic partnership with Groq, thus supporting Groq in manufacturing AI/ML servers and full-stack solutions. Given its growth initiatives and a favourable environment, the momentum in Celstica’s stock price could continue.
goeasy
goeasy (TSX:GSY), which started its consumer lending business in 2006, took 13 years to expand its loan portfolio to $1 billion. However, since then, the company has quadrupled its loan portfolio to $4.4 billion as of September 30. The expansion of its loan portfolio has boosted its financials, with its revenue and diluted EPS (earnings per share) growing at 20.1% and 28.7% CAGR (compound annual growth rate) over the last five years, respectively. Amid this solid growth performance, the company has returned 228% in the previous five years at an annualized rate of 26.8%.
Given its wide variety of financial products and services across various verticals and omnichannel distribution channels, goeasy could continue to grow its loan portfolio. The company’s management expects its loan portfolio to grow 41% from its current levels to $6.2 billion by the end of 2026. Amid the expansion, its topline could grow at a 14% CAGR while improving its operating margin from 38.1% in 2023 to 42% in 2026. Moreover, the company has raised its quarterly dividends at an annualized rate of 30% and currently offers a forward yield of 2.6%. Considering all these factors, I believe goeasy would be ideal for your long-term portfolio.
