When you are new to investing in stocks, the best thing you can do is sufficiently diversify and take a long-term investing mindset. An investor owns a stake in a real business. A trader buys a stock hoping to get a better price at a later point.
If you want to be a business owner of quality companies, here are five I wouldn’t hesitate to buy if I was starting out.
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A top Canadian tech stock
Topicus.com (TSXV: TOI) is a Canadian stock but almost all its operations are in Europe. It is a serial acquirer of niche software businesses there.
It generally acquires these companies at attractive valuations, provides operational best practices, and then helps them maximize cash flow generation. It then takes that cash and reinvests it into more software businesses.
Despite great financial and operational performance this year, this Canadian stock has recently declined. TOI is trading at an attractive valuation if you have a long-term perspective. It has the markings of a great long-term compounder.
A turnaround story
TFI International (TSX: TFII) has been a long-term winner for patient shareholders. Its stock is up 454% over the past 10 years. However, TFII stock is down 31% year to date.
TFI is a major trucking and transport business in Canada and the U.S. The freight market has been terrible over the past six quarters, and it impacted TFI’s results. Despite this dynamic, the company has been generating strong free cash flow. It has been buying back stock with that cash.
This is a stock you buy because of management’s great long-term record and its great portfolio of companies. When the freight market recovers, so will this Canadian stock.
A solid dividend stock
Every investor should have a few dividend stocks. When the market dips (and it always does), it is nice to earn dividend income. Pembina Pipeline (TSX: PPL) is a really solid stock.
It is one of the largest midstream and pipeline players in Western Canada. Over 85% of its income is from contracted sources.
The energy firm is one of only a few companies building an LNG terminal in Canada. It also could become a player in data centre power soon. This stock yields 5.3% right now.
A defensive recession-resilient stock
Canadians and Americans generate a lot of waste. Waste removal and disposal providers like Waste Connections (TSX: WCN) provide a quintessential service. It is the third largest waste company in North America.
It focuses on secondary markets where it has limited competition. Its infrastructure is very hard to replicate, so it is very hard to compete with. This provides exceptional pricing power.
A combination of smart, regular acquisitions and annual contracted growth have helped it deliver mid-teens total returns for years. Its not a cheap stock, but it is a recession-resilient stock to hold long term.
A small-cap Canadian growth stock
VitalHub (TSX: VHI) has a market cap of $660 million. It provides specialized patient flow, care coordination, and compliance software for the healthcare industry.
The healthtech focuses on healthcare niches where big competitors don’t operate. Likewise, it focuses on regions like Canada, the U.K., and Australia where public health services are demanding efficiency solutions.
Over the past five years, it has grown revenues by a 50% compounded annual growth rate (CAGR) and earnings per share by a 13% CAGR. It is not a cheap stock. However, if this Canadian small-cap stock can continue growing by an elevated double-digit rate (like it has been), it could end up being a cheap buy today.
