When you extend the length of the holding period of a Canadian stock, you actually increase your chances of a successful investment outcome. Timing in and out of the market can seem like a great way to create Alpha. However, it is incredibly difficult to execute the perfect time to buy or sell a stock. Why?
The biggest reason is that human emotions hamper investors. When stocks go down, the fight-or-flight response is triggered. The rational part of your brain becomes restrained in favour of fear instincts. If you succumb to your feelings, you often end up selling stock at the worst possible time (a market bottom) and then buying at the worst possible time (at market highs).
For many investors the best thing to do is, “Buy right and hold on,” as the famous and seasoned investor Thomas Phelps states. Pick stocks in high quality businesses and hold on for years and even decades. If you are wondering what kind of Canadian stocks could fit this profile, here are three to think about for a long-term hold.
A real estate stock that has become a top Canadian compounder stock
Mainstreet Equity (TSX:MEQ) is the kind of Canadian stock you want to own for a few decades. Its stock is up 3,800% over the past 20 years. For a real estate stock, that is an incredible record. Most real estate investment trusts (REITs) have only delivered single-digit annual returns (including the distributions) over the past few decades.
Mainstreet is different because it is not a REIT. It does not need to distribute over 90% of its income to shareholders. It has largely taken its cash flows and reinvested the proceeds into building an apartment rental empire.
These are not fancy apartments. They are affordable and centrally located. However, Mainstreet has a formula to make the right investments to produce the best rental rate growth. It has a great portfolio in Western Canada and still has plenty of acquisition opportunities. With a founder-led CEO, you invest alongside the best.
An industrial stock with an exceptional growth trajectory
Another Canadian stock worth holding for decades is TerraVest Industries (TSX:TVK). Over the past five years, this Canadian stock has risen 927%. Like Mainstreet, it is not exactly a flashy business.
TerraVest operates a mix of industrial companies focused on tanks, trailers, oilfield services, and boilers. These are hardly exciting assets. The exciting part comes from TerraVest’s ability to acquire these types of businesses at attractive valuations, unlock attractive synergies, and then generate substantial free cash flows.
This Canadian stock has had a strong run-up after several major acquisition announcements this year. It is not cheap today. However, average into a long-term position, and you could do very well with a long investment horizon.
A large-cap Canadian stock for decades of growth
WSP Global (TSX:WSP) is another quality Canadian stock worth a long-term hold. With a market cap of $36 billion, WSP is now one of the largest engineering, design, and advisory firms in the world.
Not only is it diversified by geography, but it also has a range of services that can help design, manage, and maintain major projects at every point of their lifecycle. The company has grown by acquisition. However, today, organic growth and internal initiatives could help improve margins and profitability.
Management is targeting double digit growth for several years ahead. The current stock price reflects this optimism (it just hit an all-time high). However, if WSP were to pullback in 2025, it could be a smart time to take a long-term position.
