The Tax-Free Savings Account (TFSA) is a great place to hold stocks that you expect to win for many years ahead. The simple reason is that you don’t want to be liable to pay substantial amounts of tax on your long-term gains.
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Invest in a TFSA before more taxes come
The Canadian government has racked up a massive spending deficit in the past decade. It is not unforeseeable that it will look to steadily increase its share of your capital gains in future years.
The best thing you can do is maximize tax efficiency by investing through your TFSA. No tax means more money in your pocket. If you are wondering which Canadian stocks could multiply tax-free in a TFSA for years and decades ahead, here are three to look at today.
Colliers: A real estate stock that is becoming so much more
Colliers International Group (TSX:CIGI) is just the kind of stock you want to hold for years in a TFSA. This company has compounded annual returns by an 18% compounded growth rate for the past 20 years.
Colliers is known for its commercial real estate brokerage business. However, the company has become an engineering, consulting, and project management powerhouse. After a major engineering acquisition in Canada, it just added more firms in Canada and Australia.
Today, over 70% of Colliers earnings is from recurring sources. Its transaction business has been soft for the past two years. However, with interest rates quickly declining, there is a good chance real estate trading activity starts to significantly increase.
Its long-standing (and highly invested) CEO has some great incentives to deliver strong double-digit growth in the years ahead. It is not the cheapest stock right now. However, if you have five or more years, you are likely to do well by investing today.
Topicus.com: A long-term software stock for a TFSA
Topicus.com (TSXV:TOI) is another stock to hold for decades in a TFSA. It was spun out from Constellation Software a couple of years ago. Topicus is the combination of two large European software businesses that focus on building and acquiring specialized niche market software.
Europe has many different countries, languages, governments, institutions, and laws/regulations. All these different niches require specialized software applications. As a result, Topicus has no shortage of acquisition opportunities. It also has a strong development platform that is providing strong organic growth.
With a market cap of $10 billion, Topicus is like Constellation Software, but five to 10 years ago. If it can execute in a smart manner, it could deliver similar great returns in a TFSA in the coming years ahead.
TFI: A top transport business to own for decades
A final great TFSA stock is TFI International (TSX:TFII). There is nothing exceptionally exciting about its business. It is a trucking, logistics, and transport giant in Canada with a growing operating base in the U.S. However, its long-term returns have been outstanding. Its stock is up 587% in the past 10 years.
While these are not great individual businesses on their own, TFI has a low-cost, efficient operating model. This helps it earn industry leading returns on invested capital and strong free cash flows. TFI is a serial acquirer of transport businesses. With a weak freight environment and a strong balance sheet, TFI could continue to be an opportunistic acquirer.
The company has a long-term, highly invested CEO. He is hungry to unlock shareholder value for the long-term and a great manager to partner with. TFI is a super blue chip stock to hold for big tax-free returns in a TFSA.
