Investing is essential to create wealth and achieve your financial goals. By starting early, one can benefit from the power of compounding. Besides, investing in equity markets is one of the easiest and most convenient ways to start your investment journey. However, one has to be careful while choosing stocks. So, beginners should look for companies with solid underlying businesses that generate stable cash flows irrespective of the market conditions.
Here are my three top picks for beginners.
Waste Connections
Waste Connections (TSX:WCN) collects, transfers, and disposes of non-hazardous solid waste in the United States and Canada. It operates in secondary and exclusive markets and thus faces less competition. Meanwhile, the company is expanding its footprint through organic growth and aggressive acquisitions. Supported by these growth initiatives, the waste solutions provider has been delivering solid performances over the last few years, driving its stock price. In the previous 10 years, WCN has delivered over 550% returns at a CAGR (compound annual growth rate) of 20.8%.
The waste management company has continued its acquisition strategy by acquiring 30 waste treatment and disposal facilities from Secure Energy Services for $1.1 billion last month. Besides, it has an impressive pipeline of developmental projects, which can boost its financials in the coming quarters. Amid these initiatives, management has provided optimistic 2024 guidance, with its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) projected to grow by 13%. Also, its adjusted EBITDA margin could expand by 120 basis points to 32.7%.
Given the essential nature of its business, solid performance over the years, and healthy growth prospects, I believe Waste Connections would be an excellent buy for beginners.
Dollarama
Dollarama (TSX:DOL) is a discounted retailer offering a wide range of consumer products at attractive prices. The company can deliver its products at a compelling value to customers through its superior direct sourcing and buying capabilities, and efficient logistics. So, it has witnessed solid same-store sales irrespective of the macro environment. The quick sales ramp-up and an average payback period of less than two years have resulted in low capital intensity and high return on investment on its network expansion.
Meanwhile, the Montreal-based company has been growing its top-line and net income at an annualized rate of 11.3% and 17.5% since fiscal 2011, respectively. Amid this solid performance, DOL stock has returned over 635% in the last 10 years at a CAGR of 22.1%. The discount retailer has planned to add over 500 stores over the next seven years. Further, the contribution from its subsidiary, Dollarcity, which operates in Latin America, could also grow amid its expansion plans. Given its solid underlying business and excellent growth prospects, I believe Dollarama would be an ideal buy for beginners despite its expensive valuation.
Fortis
Another stock that would be ideal for beginners would be Fortis (TSX:FTS), which serves 3.5 million customers, meeting their electric and natural gas needs. With around 93% of its assets involved in transmitting and distributing natural gas and electricity to customers, its financials are stable and predictable. The company has also delivered an average annual total shareholder return of 10.7% for the last 20 years, outperforming the broader equity markets.
The utility has also raised its dividends uninterruptedly for the last 50 years, with its forward yield currently at 4.37%. Further, it has planned to invest around $25 billion from 2024 to 2028 in low-risk assets, growing its rate base at an annualized rate of 6.3%. The expanding rate base could boost its cash flows, allowing it to maintain its dividend growth. So, the company’s management is confident of growing its dividends at 4 to 6% annually through 2028. Further, FTS’s valuation looks attractive, with its NTM (next 12 months) price-to-earnings multiple of 16.9, making it an attractive buy.
