If you have $2,000 to invest, you could split it evenly across these four TSX stocks. Here’s why you can allocate $500 each to software, fashion, pet care, and fleet services for diversification.
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Thomson Reuters: A top TSX stock turning AI into real revenue
For the past two years, many investors worried that AI would hurt Thomson Reuters (TSX: TRI). Why would enterprises pay for legal research when a chatbot will answer for free?
The second quarter gave a clear answer. According to the company’s second-quarter (Q2) earnings call, organic revenue grew 8%. Its three core segments (Legal, Corporates, and Tax, Audit & Accounting) grew faster, at 10%, up from 9%. Free cash flow rose 29% to US$727 million.
The more interesting part is what the company built.
Thomson Reuters spent about US$40 million developing its own large language model, called Thomson.
The model was trained on less than 10% of its legal content. Even so, the company says benchmarks show it performs about as well as leading AI models on general tasks, at a lower cost.
The company isn’t being disrupted by AI. Instead, it owns the trusted content that AI depends on.
However, the tax business witnessed sales execution problems, and management expects Q3 margins of about 36%. Even so, the TSX tech stock raised its full-year revenue outlook.
Groupe Dynamite: One of the top Canadian stocks for growth
Groupe Dynamite (TSX: GRGD), the owner of Garage and Dynamite, is growing much faster than most retailers.
According to its Q2 call, revenue grew 29.8% to $423.6 million, while U.S. revenue grew 52.2%. Adjusted diluted earnings per share rose from $0.57 to $0.96. Management raised its revenue growth guidance to between 25% and 27%.
Garage moved away from denim and plaid toward activewear and lifestyle clothing. It also opened stores in top locations like SoHo and Oxford Street.
The average price per item has roughly doubled since 2019, and about 95% of sales occur at full price.
Pet Valu: A top TSX stock that runs on loyalty
Pet Valu (TSX: PET) is one of the world’s largest pet retailers.
Same-store sales were roughly flat in Q2, driven by higher fuel prices, inflation, and slower consumer spending. However, revenue rose 3.6% to $291 million.
It reported gross margins of 32.5%, up 110 basis points from Q1. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose 8% to $65 million, which indicates a margin of over 22%.
Pet Valu’s loyalty program now accounts for about 90% of sales, which gives management detailed data on how customers shop. Down almost 60% from all-time highs, the TSX stock offers you a yield of 3%.
Element Fleet Management: A top Canadian stock the market is overlooking
At the CIBC conference on September 24, analyst Paul Holden listed Element Fleet Management’s (TSX: EFN) results so far this year. EFN has increased revenue by 13% and earnings by 18%, while reporting a return on equity of almost 20%.
Then he noted that the share price hasn’t kept pace with those numbers. CFO Heath Valkenburg was candid. He said the company hasn’t won enough new business lately, and it has changed its sales leadership.
Still, client retention is about 98%. About half the fleet market still manages its own vehicles, leaving plenty of room to grow.
Management also showed discipline. It walked away from a bid for FleetPartners once the price went above its return targets. Instead, it is buying back its own shares faster than usual.
The Foolish bottom line on these top TSX stocks
None of these stocks will make you rich by next quarter.
But each has a durable advantage and management teams that are focused on the long run. For investors who can wait for results, $2,000 spread across these four top TSX stocks is a good start toward a stronger portfolio.
