If you are new to investing, the Tax-Free Savings Account (TFSA) might be one of the most important tools you can use in maximizing investment returns. When you invest tax-free, all your income (gains, interest, and dividends) stays with you.
When that income is compounded upon itself over years and decades, it can create substantial wealth. It also helps to have a smart portfolio of stocks that are also compounding their earnings and cash flow.
If you are wondering what stocks are worth holding long term in your TFSA, here are four to think about today.
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A growing real estate services stock
Colliers International Group (TSX: CIGI) has a strong record of delivering for shareholders. Over the past 10 years, it has compounded shareholders’ capital by a 20% annualized rate.
Colliers is recognized globally for its commercial real estate brokerage business. While this is a large part of its business, Colliers is now a significant player in engineering/consulting, as well as asset management. In fact, today over 70% of its income comes from recurring sources.
Colliers has a founder-led, highly invested management team. Their incentives are aligned with shareholders, and one can expect similar type returns in the coming years ahead.
A European software consolidator
Topicus.com (TSXV: TOI) is a relatively unknown stock in Canada (despite its $9.8 billion market cap). That is mainly because it operates in Europe.
The software firm is a spin-out from Constellation Software. It is completing a similar strategy to consolidate vertical market software businesses.
Topicus is still in its early innings of growth. Europe is a large, segmented market. Topicus is also looking at opportunities in Latin countries, South America, and Southeast Asia. Its stock recently pulled back, and it could be a good buying opportunity.
A fast-growing fintech stock
Propel Holdings (TSX: PRL) is one of Canada’s fastest-growing fintech stocks. Its revenues have grown by a 55% compounded annual rate. Earnings per share has grown even faster at a 58% compounded annual rate.
Propel provides small-sized loans to non-prime consumers. It has an online lending platform that uses artificial intelligence to quickly underwrite loans. It can use the platform around the world, so the company is able to scale quickly. The larger it grows, the higher its margins increase.
Propel still has a significant market to take. It just acquired a lender in the U.K. that could become a platform for growth in Europe. For its growth, this stock is not crazy expensive today.
A trucking company with a great record
TFI International (TSX: TFII) has been another excellent long-term stock. Its stock is up 350% in the past five years and 575% in the past 10 years. Trucking and shipping are not exciting businesses.
However, TFI’s strategy of multiple acquisitions and a low-cost operating model has created a lot of value over time. Recently, TFI has had some issues in its U.S. less-than-truckload business.
That has put a cap on the stock price. However, once it demonstrates improvement, the market is likely to reward it. There are likely to be more acquisitions ahead.
Further, TFI has opportunities to unlock value by spinning off parts of its business. Like Colliers, it has a highly invested management team. With their incentives aligned with shareholders, there could be more great returns ahead.
