$5,000 invested in stocks can become a substantial sum with the right portfolio of stocks. In fact, a $5,000 investment compounded by an average 15% rate of return could become as much as $20,000 in 10 years’ time. Increase your length of time at the same rate of return to 20 years, and $5,000 could become $81,000!
While that rate of return is not guaranteed because markets do fluctuate from one year to the next, this simply demonstrates the power of compounding over time. Even modest amounts can become substantial if you pick the right stocks and you hold them for long periods.
If you are looking to start a new $5,000 portfolio, here are five stocks I would buy that have room to grow in the years to come.
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A top Canadian space company
MDA Space (TSX: MDA) is a rising leader in the global space economy. It has expertise in developing low-orbit satellites and space robotics. Today, it has a $4.8 billion backlog that should drive double-digit growth for several years ahead.
MDA has a strong reputation and is gaining market share from a global customer base. The space industry is expected to triple over the coming 10 years. That should provide a long runway for MDA. Despite strong execution, it trades at a discount to other space peers. It is an attractive buy today.
A top software stock with European exposure
Another stock I’d add to my growth portfolio is Topicus.com (TSXV: TOI). It operates and acquires niche software stocks across Europe. These tend to be small, specialized companies that focus on a specific industry, region, or sector.
Topicus has good lineage. It was spun out from Constellation Software (a top TSX performer) a few years ago. So far, it has delivered good results. However, this stock is not cheap at all today. It would be best to buy it on a major pullback if one were to come.
A residential services business
FirstService (TSX: FSV) is another growth stock to buy for a $5,000 portfolio. FirstService has a great record of solid returns. Its stock has compounded by a 20% compounded annual growth rate over the past decade.
FirstService operates a large residential property management business that is complemented by an array of property services companies. It has used a smart acquisition model to become a leading provider in North America. For a stock growing by 10-15% per annum, FirstService is a great bet.
A blue-chip company
If you want exposure to a solid blue chip stock, you can’t find much better than Canadian Pacific Kansas City (TSX: CP). Today, CP operates the single-rail network that spans Canada, the United States, and Mexico. This network provides considerable competitive advantages and growth opportunities.
CP has outperformed most of the rails over the past few years. It has a top management team focused on operational excellence. With a quickly improving balance sheet, it is delivering increasing cash returns to shareholders. It’s a great bet for a steady-growth blue-chip stock.
A small-cap stock
A final stock for your growth portfolio is Firan Technology Group (TSX: FTG). This small-cap stock is up 60% this year. The company manufactures specialized circuit boards and cockpit components for the aerospace industry.
Demand for new airplanes is massive. Major original equipment manufacturers (OEMs) have decades-long backlogs. This should support long-term growth for a company like Firan. It has been executing well. Recent acquisitions have expanded its components and customer exposure.
This stock trades at an elevated valuation compared to historic levels. However, it is an attractive buy on any general market pullback.
