Are you looking for stocks to buy and hold forever in your tax-free savings account (TFSA)?
It’s a nice idea, but truthfully, companies that are worthy of life-long holding periods are few and far between. Warren Buffett famously said “our ideal holding period is forever,” but researchers found that he actually holds 60% of the stocks he buys for under a year. That’s not quite forever.
Nevertheless, a lifelong holding period is a worthwhile aspirational goal. First, it limits the money you lose to brokerage commissions and hidden fees. Second, if it all works out well, you may in fact find a business that never sours but keeps rewarding you over your entire lifetime. In this article, I explore three TSX stocks that have such potential. Although I by no means guarantee that these stocks will remain as good as they are now for a lifetime, they have characteristics associated with stable, lasting companies.
Alimentation Couche-Tard
Alimentation Couche-Tard Inc (TSX:ATD) is a Canadian gas station/convenience store company. It sells fuel at the pumps and snacks, and lottery tickets and beverages inside. Despite the reputation that gas stations have for barely profiting on the gasoline itself, ATD earns about 40% of its gross profit from gasoline and diesel. So, fuel sales is a profitable, bottom-line contributing segment for Alimentation Couche-Tard.
A major development for Couche-Tard this year is the acquisition of Seven & I, the owner of the 7/11 convenience store chain. 7/11 is the world’s biggest convenience store chain, and if ATD succeeds in buying it, it will then be the biggest.
To date, neither Alimentation Couche-Tard nor Seven & I have said what price Alimentation offered for 7/11. Some think that Alimentation will be able to secure the deal at a cheap valuation because Japanese stocks trade at only nine times earnings on average. Seven & I itself trades at 29.5 times earnings, though, so it might not be obtained as cheaply as its country’s equity markets imply. Nevertheless, if ATD acquires 7/11, it will control one-fifth of the global convenience store industry. That’s a big deal.
CN Railway
The Canadian National Railway (TSX:CNR) is Canada’s largest railroad company. Transporting $250 billion worth of goods each year, it is a cornerstone of the continent’s economy. CN Railway’s stock hasn’t been performing well this year, but it has been performing well over the last five. For this reason, it may be a good stock to look at today.
CNR has always had high profit margins and acceptable levels of growth. It still has the margins, but growth took a hit in 2023, when demand for crude by rail fell compared to the red-hot year 2022. That factor affected all North American railroads that year, so it wasn’t a specific issue with CNR. At any rate, CN was on the road to recovery by its most recent quarter, with revenue of $4.3 billion up 6.7% year over year.
Restaurant Brands
Restaurant Brands International (TSX:QSR) is a Canadian restaurant chain that was formed by the merger of Tim Hortons and Burger King. It later added Popeye’s Louisiana Kitchen. The chain has grown considerably over the years, specifically at the following 10-year compounded annual (CAGR) rates:
- Revenue: 21.8%.
- Earnings: 18%.
- Free cash flow: 12.3%.
- Assets: 15.8%.
That’s a pretty good track record of compounding right there. QSR is very profitable as well, with a 17% net income margin, a 16.5% free cash flow margin, and a 43% return. This stock has all the telltale signs of one that will perform for a long time.
