I have often heard many investors argue that there is no point picking TSX stocks, because passive investing always wins the day. They are mostly right. For many Canadians, buying two or three of the top global indices or a few pointed ETFs is a really simple and care-free way to invest.
There is nothing wrong with market returns
If you believe global economies are going to continue growing into the future, your chances are pretty good that you will earn a solid, market-aligned return over time. If you don’t have time or willingness to research and fully unpack individual stocks, then this is your best approach.
It is possible to beat the market, but there is a cost
However, there are some investors that actually enjoy learning about investments and understanding the details of what makes a great stock pick. Firstly, stock-picking takes a basic understanding about how businesses work. Secondly, it takes a willingness to learn and widen your knowledge base. Thirdly, it mostly takes time. That is time to research, invest, and then monitor your investments. The remaining effort is just being patient and sticking with your stocks through the market’s ups and downs.
The keys to picking individual TSX stocks
The good news is that with this approach, TSX investors can actually outperform the market and garner superior returns. Simply purchase great quality stocks with long, long tailwinds supporting their growth. Other than checking on them from time to time, your best bet is to wait and be patient.
I am not talking about patience over a few quarters, but rather years and decades. In essence, you are building a portfolio of the best TSX stocks you can think of, and then, like a passive investor, you do nothing. Its more work upfront, but the payoff can be spectacular over a lifetime. If you are keen for that forever-investing approach, here are two TSX stocks to buy in June and hold for forever.
A top TSX infrastructure stock
Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) is a great TSX stock for a mix of diversity, income, and growth. It operates infrastructure assets across the globe that include pipelines, power transmission lines, railroads, ports, data infrastructure, and cell towers. In one stock you get a broad mix of cash-yielding assets. It is a great stable stock, because its portfolio is diversified across asset class and geography.
Most of its assets are either contracted or regulated, so it generates very stable streams of cash. Not only that, but when the economy is good, it benefits from organic growth (higher volumes and inflation-indexed contracts) and selling off mature assets. Likewise, the company has a great balance sheet, which is enabling it to keep growing by acquisition.
Also, this TSX stock is a dividend juggernaut. It pays a 3.7% dividend, but it has grown that dividend by a 10% compounded annual growth rate since 2009. As economies expand, society will need more infrastructure to support our populations. Consequently, Brookfield Infrastructure is particularly well placed to be a long-term beneficiary from this trend.
The railroad of the skies
Another infrastructure-like stock is Cargojet (TSX:CJT). It is like an essential railroad track, but in the skies. I see Cargojet as a critical link in the new era of e-commerce transportation. This TSX stock has established itself as the number one overnight air freight delivery business in Canada. As e-commerce and one-day delivery expectations continue to grow, Cargojet will continue to see strong demand for its services.
It doesn’t hurt that it has major contracts/partnerships with Amazon and Canada Post. Likewise, it expanded its relationship with the DHL courier group to expand services internationally. While international freight operations could take time to grow in scale, it is a large growth opportunity for Cargojet. This TSX stock is down 17% year to date, but given the potential for growth, it looks like a great long-term buy today.
