Since the Tax-Free Savings Account (TFSA) keeps your investment income totally tax-free, it’s the perfect place to compound and grow your investments over long periods of time. You don’t want to pay any tax on an investment that multiplies by five times, 10 times, and 50 times.
The hard part sometimes is finding those investments that are going to multiply (and hopefully quickly at that). If you are looking for some stock ideas that you can trust over a lifetime, here are three stocks that have a good chance of delivering good returns ahead.
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Constellation Software: Long-term for a TFSA
Constellation Software (TSX: CSU) has to be at the top of the list. This Canadian stock has delivered a 465% return in the past 10 years and a 13,891% return over the past 20 years.
Constellation has truly become its name. It is a constellation of over a thousand niche software companies around the globe. None of them have massive total addressable markets. However, they have entrenched customers and low churn rates.
The company is deploying capital at a strong pace. Constellation grew revenue by 17% in the second quarter. It has over $800 million in capital committed for acquisitions right now.
This Canadian stock is down 32% in the past year. Worries about AI disruption have pulled the stock down. However, the pullback presents a very attractive buying opportunity for patient investors.
Constellation has a leading management team and a juggernaut investment platform. It’s a great stock to tuck away in the TFSA for the years to come.
Firan Technologies: A top TFSA small-cap stock
Small-cap stocks can be a great place to look for multiplying returns in your TFSA. They start from a smaller base and have substantial prospects for growth. An interesting small-cap stock is Firan Technologies (TSX: FTG). It only has a market cap of $630 million.
It manufactures specialized cockpit components, circuit boards, and aftermarket sensors for the aerospace industry. The investment thesis is relatively simple. There is a decades-long backlog in the aircraft industry. Firan is smartly positioned in Canada, the U.S., China, and India to help meet the growing demand.
Firan has been delivering solid double-digit growth and a rising backlog of projects. It has a founder-led CEO who has a large personal stake in the business. It is by no means a cheap stock right now. However, it would be a great addition to a TFSA on a pullback.
Descartes Systems: All the ingredients of a strong compounder
Descartes Systems Group (TSX: DSG) is another stock to trust in a TFSA. This $9.2 billion company provides the Global Logistics Network. It complements that with a suite of money-saving software services that cater to the transport, logistics, and supply chain industries.
Descartes is extremely profitable (25% profit margins) and generates tonnes of cash. It has a cash-rich balance sheet (+$360 million) that it can use to acquire smaller transport technology businesses.
This stock is down on AI disruption concerns. Yet, the company is smartly integrating AI use cases across its platform. New applications and services continue to fuel solid organic growth. If you want a great compounder trading at an attractive valuation (lowest in 10 years) today, Descartes is a great bet for a TFSA.
