If you want to retire a millionaire, it is crucial to start accumulating wealth as early as possible. Spend less than you earn, invest the difference, and then be patient on those investments. This is the ultimate formula for building wealth.
There is no such thing as getting rich quickly. You need to be disciplined with your finances and wise with your investments. Even though the stock market is liquid and easy to trade, your best bet is to buy stocks in high-quality businesses and hold them for years and years.
If you have decades until retirement, here are three TSX stocks that could have a good chance of building serious wealth.
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Aritzia: A long way to grow
Aritzia (TSX:ATZ) seems like an overnight success story. However, it has taken years of thoughtful development for its brand of “Everyday Luxury” women’s apparel to take off. The company has gained significant success in Canada, and it is now gaining very strong traction in the United States. In fact, the U.S. now makes up nearly 50% of its revenues.
The U.S. apparel market is 10 times the size of Canada. Right now, Aritzia has only breached a fraction of that market, which indicates that it still has significant opportunity to grow.
Aritzia is profitable and its margins should only improve as it scales. The company has no debt and cash to continue its growth plans.
Management has a large stake in the company, so its incentive for success is equally aligned with shareholders. While this stock is hardly cheap, it is a quality business that could provide attractive returns over the coming years ahead.
CP Rail: This stock could keep chugging for decades
Canadian Pacific Railway (TSX:CP) is perhaps not quite a flashy stock as Aritzia. However, this company has delivered a very attractive track record of elevated returns. Since 2013, it has delivered an annual average return of 17.7%, or 408.9% in total. For a boring railroad, that is impressive.
Canadian Pacific has been a leader in precision scheduling railroading. Despite being one of the smallest major North American railroads, it has consistently been one of the most profitable and efficient railroads in Canada.
It is about to get much larger if it can get regulatory approval to fully integrate Kansas City Southern into its rail network. In fact, it would have the only rail network that spans Canada, the U.S., and Mexico.
That should create many synergies and ample opportunities for growth in the coming years. Like Aritzia, CP is not cheap, but it is a very high-quality business that could be worth a long-term hold.
Constellation Software: Investments are accelerating
Constellation Software (TSX:CSU) is one of the best-performing TSX stocks over the past decade. Its stock is up 1,700% in that time. Yet there is reason to believe its strong performance will continue.
Constellation acquires and manages niche software businesses around the globe. Since inception, it has acquired hundreds of small, specialized businesses under its umbrella.
In the past two years, its acquisition volume has drastically increased. It spent over $1 billion in 2021 and over $1.8 billion in 2022. This will eventually translate into strong cash flow returns for shareholders.
It has also started to spin-off investment platforms (Topicus.com in Europe) and software verticals (Lumine in media/communications) in a way to unlock more shareholder value. For a stock with a great track record and a highly positive outlook, Constellation is a solid bet to tuck away and hold to retirement.
