The macro uncertainty poses challenges for the equity market. Despite the short-term volatility, long-term investors could continue to buy and hold high-quality TSX stocks without worry, as these fundamentally strong companies will likely generate above-average returns. Against this backdrop, here are three TSX stocks in which I’d invest $4,000 today to outperform the broader market.
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Hydro One stock
Hydro One (TSX: H) is one of the top TSX stocks to generate strong returns. The company is engaged in electricity transmission and local distribution but is not involved in power generation. This implies that its operations remain unaffected by changes in commodity prices, which adds stability. Moreover, the utility giant’s operations are regulated, enabling it to generate steady earnings and deliver predictable cash flows regardless of market conditions.
Thanks to its resilient business model, Hydro One stock has gained over 145% in five years, reflecting a compound annual growth rate (CAGR) of 19.7%. Moreover, it rewards its shareholders with higher dividends. Hydro One has raised its dividend at a CAGR of 5% in the last eight years.
Hydro One projects its rate base to grow at a CAGR of 6% through 2027. This will lead to earnings growth of about 6–8% annually during the same period and enable it to grow its dividend by 6% annually. Moreover, Hydro One will likely benefit from increasing electricity demand led by the electrification of commercial buildings and vehicles, population growth, and the expansion of data centres. All these suggest that Hydro One is poised to deliver solid total returns in the long run.
TerraVest Industries
Investors looking to create significant wealth could consider TerraVest Industries (TSX: TVK) stock. This leading industrial manufacturer has outperformed the broader market, delivering a remarkable capital gain of nearly 1,072% over the past five years. Despite the notable jump in its price, the stock has significant upside potential, given the company’s strong position within several high-growth end markets.
As TerraVest primarily manufactures products for its domestic markets (where it operates), its business remains largely unaffected by tariff- and trade-related headwinds, adding stability to its operations. Moreover, its targeted investments to increase manufacturing efficiency, product expansion, and strong balance sheet augur well for growth.
Notably, TerraVest’s recent acquisition of L.B.T. Inc., a North American tank trailer manufacturer, will likely accelerate its growth. By bringing L.B.T. under its umbrella, TerraVest is strengthening its position in the tank trailer market and will benefit from operational synergies that are expected to enhance efficiency and broaden its market reach.
Overall, TerraVest is well-positioned to deliver solid growth and generate above-average returns.
Waste Connections stock
Waste Connections (TSX: WCN) is another attractive long-term stock to buy now. The company provides non-hazardous waste collection and disposal services and mainly focuses on secondary and rural markets. This strategy enables it to lower customer churn while ensuring stable revenue.
Thanks to its solid operations, WCN generates strong free cash flows, which allow it to accelerate growth through acquisitions and offer higher dividends to its shareholders.
Looking ahead, Waste Connections is well-positioned for continued growth. Price-driven organic growth, a strong acquisition pipeline, and rising recycled commodity revenue are expected to boost its financials and dividend payouts. Additionally, its early-mover advantage in select rural markets and niche sectors such as energy exploration and production and waste treatment will likely provide further long-term opportunities.
