Long-term investing is an excellent strategy for wealth creation, as it allows investors to benefit from compounding and ride out short-term market volatility. Rather than focusing on temporary market fluctuations, long-term investing prioritizes fundamentally strong companies with durable competitive advantages, healthy balance sheets, and attractive growth prospects. This disciplined approach would not only reduce the impact of short-term market noise but also increase the likelihood of generating strong risk-adjusted returns over the years.
The potential rewards can be substantial. For example, a $100,000 investment that compounds at an annualized rate of 12.2% would grow to approximately $1 million over 20 years. With that in mind, investors seeking outsized long-term returns may want to consider the following two Canadian stocks, which have the potential to deliver annualized returns exceeding 12.2%.
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Dollarama
My first pick is Dollarama (TSX:DOL), a leading discount retailer operating 1,691 stores across Canada and 402 in Australia. The company benefits from a highly efficient direct-sourcing model that eliminates intermediary costs and enhances its purchasing power, allowing it to offer a broad range of products at attractive prices. Therefore, the company enjoys healthy same-store sales regardless of the macroeconomic factors.
The retailer’s consistent execution and aggressive expansion strategy have translated into impressive financial growth and shareholder returns. Since fiscal 2011, Dollarama has expanded its store network from 652 locations to 1,691 stores in Canada, driving steady revenue and earnings growth. As a result, the stock has delivered a remarkable total shareholder return of 514.5% over the last decade, representing an average annual return of 19.9%.
Looking ahead, Dollarama still has significant room for growth. Management plans to open 60 to 70 new stores annually, aiming to increase its Canadian store count to 2,200 and expand its Australian store network to 700 stores by the end of fiscal 2034. Given the company’s capital-efficient business model, rapid store maturation, attractive payback periods, and modest maintenance requirements, these expansion initiatives should continue to support strong revenue and earnings growth.
Dollarama also offers meaningful exposure to the Latin American markets through its 60.1% ownership stake in Dollarcity, which operates 732 discount stores across five countries. Dollarcity aims to expand its network to 1,050 stores by the end of fiscal 2031, while Dollarama owns the option to raise its ownership stake to 70% by the end of next year. As Dollarcity continues to grow, its contribution to Dollarama’s earnings should become increasingly significant.
Given its resilient business model, proven growth strategy, and multiple long-term expansion opportunities, I believe Dollarama is well-positioned to deliver strong shareholder returns for years to come.
Celestica
Another stock that I believe offers compelling long-term return potential is Celestica (TSX:CLS), a leading electronics manufacturing services provider. Driven by its growing exposure to the rapidly expanding artificial intelligence (AI) market and a series of strong quarterly results, the company has delivered a remarkable total return of 2,811% over the last three years, representing an annualized gain of 207.6%.
Despite its impressive run, Celestica’s growth story appears far from over. The increasing adoption of AI technologies by businesses and consumers is driving significant investments in data centre infrastructure, prompting hyperscalers and cloud service providers to expand their computing capacity. This trend is creating a substantial long-term growth opportunity for Celestica, particularly through its hardware and networking solutions supporting next-generation AI workloads.
To capitalize on this favourable industry backdrop, the company continues to invest in innovation and expand its manufacturing capabilities. Notably, Celestica plans to establish a new manufacturing facility in Fort Worth, Texas, which should strengthen its ability to meet growing demand for advanced data centre infrastructure and other high-value technology solutions. These investments could enhance production capacity, deepen customer relationships, and support future revenue growth.
Supported by strong secular tailwinds, ongoing capacity expansions, and a proven ability to execute, Celestica appears well-positioned to continue growing its earnings and cash flows in the years ahead. As a result, I believe the stock remains an attractive long-term investment despite its exceptional gains over the past three years.
