One of the most important factors that distinguishes new investors from those who actually build wealth is the ability to think long term. While many beginners try to chase quick wins, real wealth tends to grow from holding quality businesses for years and letting time do the heavy lifting. While this strategy might not make you rich overnight, its compounding effect could be surprisingly powerful. And the great news is that the Toronto Stock Exchange is filled with great stocks with the ability to keep delivering quarter after quarter while laying the foundation for strong future growth.
In this article, I’ll talk about two such TSX stock picks that are shaping up to be long-term wealth builders due to their solid fundamentals.
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Stella-Jones stock
First up is Stella-Jones (TSX: SJ), a reliable TSX-listed stock that plays a key role in keeping essential infrastructure running across North America. It’s best known for producing treated wood utility poles, railway ties, and residential lumber. Based in Saint-Laurent, this firm has a market cap of $4.5 billion as its stock currently trades at $81.27 per share after rallying by nearly 27% over the last six months. Investors also enjoy a small quarterly dividend, translating to a current annualized yield of about 1.5%.
The recent surge in SJ stock could mainly be attributed to investor confidence in the company’s ability to grow earnings despite short-term sales pressures. In the second quarter, Stella-Jones posted a minor 1% YoY (year-over-year) dip in its revenue to $1 billion due to a drop in railway tie volumes and lower utility pole pricing. Nevertheless, its quarterly EBITDA (earnings before interest, taxes, depreciation, and amortization) came in at $189 million with a healthy margin of 18.3%.
Interestingly, Stella-Jones acquired steel transmission structure manufacturer Locweld in May. Similarly, in September, it agreed to buy Brooks Manufacturing, a U.S.-based producer of wood distribution crossarms. These acquisitions are helping the company expand its utility product offerings and deepen its reach in the power transmission market.
With nearly $700 million in available liquidity and a strong balance sheet, Stella-Jones is in a solid position to fund more favourable deals. And with utility pole volumes gradually improving, SJ stock looks like a compelling long-term pick at current levels.
Franco-Nevada stock
If you’re interested in gold exposure without the mining risks, you may want to consider buying Franco-Nevada (TSX: FNV). This Toronto-based gold-focused royalty and streaming company has a massive market cap of over $55 billion. After rallying nearly 70% in the last 12 months, FNV stock currently trades at $286.16 per share. While its dividend yield is light at 0.7%, the company’s key strength lies in its ability to deliver dependable free cash flow.
Franco-Nevada posted record-breaking results in the second quarter as its revenue jumped 42% YoY to US$369.4 million with the help of higher gold prices and increased contributions from its new assets. More importantly, its adjusted quarterly EBITDA soared 65% YoY to US$365.7 million, while net profit more than tripled to US$247.1 million.
On the brighter side, Franco-Nevada is aggressively reinvesting in future growth efforts. It recently acquired a royalty on IAMGOLD’s Côté Gold Mine and expanded its stake in the Gold Quarry mine. Such moves add to its already diverse portfolio of over 100 producing assets.
Rather than running mines itself, Franco-Nevada earns revenue from royalties and streams – reducing its risk from inflation and rising costs. With over US$1.1 billion in available capital and no major debt, this TSX stock looks like a strong long-term wealth builder.
