Canadians can invest a fresh $7,000 into their TFSA in 2025. That’s a $7,000 contribution that can earn income from stocks and compound capital completely tax-free. Any chance to save tax is a great opportunity to elevate your returns over time.
The market is a little tricky today. The TSX is trading at all-time highs. However, the gains have largely been driven by utilities/infrastructure, banks, and mining stocks.
There are plenty of good quality stocks that aren’t getting the love this year. As a result, you might be able to pick up some bargains that could be slam dunks in future quarters and years. If you are looking for ideas, here are two in which you could deploy your $7,000 TFSA cash.
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Topicus.com: A top stock to buy on any dip
Topicus.com (TSXV: TOI) has pulled back close to 5% in the past month. The market is worried about the effect of artificial intelligence (AI) on its niche vertical market software businesses. It could be an interesting time to start building a position.
Topicus is an entrenched software provider in Europe. It focuses on government, education, and financial software services. These are often slow-moving organizations. Once they have adopted a solution, they generally commit to it long term.
Europe is an attractive place to consolidate software. The region is diverse with different countries, languages, cultures, and systems. This means there are hundreds, if not thousands, of potential bespoke software solutions that Topicus can acquire.
Year to date, revenues are up 18% and net income per share is up 97%. The company has been executing very nicely. It is never a cheap stock, but these pullbacks are perfect entry points.
Propel Holdings: A higher risk, higher reward opportunity
Propel Holdings (TSX: PRL) is a bit of a riskier play, but it could also be more rewarding. While the market is trying to understand how AI can improve businesses (and hopefully the world), Propel has already harnessed it for its strategy.
It has a proprietary lending platform that uses AI to underwrite loans quickly and effectively. Non-prime consumers tend to have a sketchy or incomplete credit history. Propel’s platform uses hundreds of variables to determine the success of a loan.
Propel has been growing rapidly. Over the past five years, revenues have risen by a 45% compounded annual growth rate (CAGR), and earnings per share have risen by a 70% CAGR.
Demand for its products remains high, and a recent acquisition in the U.K. could grow its share in Europe. Its stock trades with a price-to-earnings ratio below 10, which seems like a bargain given it is growing at almost four times that valuation.
Propel does cater to a riskier market segment. This stock can be volatile based on the economic environment. If things remain relatively constant to only slightly negative, this company should continue to do very well.
However, if there is a significant economic downturn, this stock will likely be more volatile than the market. As a result, position size this stock accordingly. As noted, PRL is a higher risk stock, but also a higher reward opportunity.
