The Canadian Stocks I’d Buy and Never Sell in a TFSA

In order for many investors to think about putting capital to work in a Tax-Free Savings Account (TFSA) in a decade or two and consider their choices a success, a number of factors need to be taken into consideration. For some investors, it’s more about the stability of returns over time. For others, achieving the maximum growth possible over this time frame is the ultimate goal, as this tax-advantaged account (from a capital gains perspective) is geared toward those goals.

In this piece, I’m going to focus on the latter individual who may be looking for outsized gains in a difficult market stymied by high valuations.

Let’s dive in.

Shopify

There’s no doubt that Shopify (TSX:SHOP) remains a top pick of mine as a high-growth option for investors looking to optimize their TFSAs for long-term retirement planning. That goes double for those with a longer investment time horizon.

Why? Well, Shopify is the all-around recognizable Canadian growth story, with some of the most robust fundamentals in the Canadian tech sector. This is a company that has chosen to retain its Canadian base and has grown its business incredibly on a global scale.

Providing the go-to e-commerce platform for individuals and businesses of all sizes to set up online shops, Shopify stock surged following the pandemic. However, as the chart above shows, it’s been a rocky ride since then, with Shopify’s share price declining alongside other software names, as threats of AI and business model disruption remain a topic of concern for investors.

That said, I think the secular shift toward e-commerce is likely to continue. And with a growing portfolio of services (merchant solutions, payments, and fulfillment) driving other sources of revenue — and higher-margin revenue at that — this is a company I’d expect to grow its bottom line at a much faster rate than its top line. At the end of the day, that’s what most investors want: long-term free cash flow growth.

Descartes Systems

Finally, Descartes Systems (TSX:DSG) is one company I’ve had on my radar for some time, but haven’t highlighted as much as other Canadian growth stocks.

That’s probably been a decent call, given the plunge in DSG stock we’ve seen play out in recent months. From a high of around $175 per share a little more than a year ago to double-digit territory today, there are plenty of reasons why this stock has been hit hard.

As it turns out, most of the same rationale that applies to Shopify (in terms of software names being beaten down thanks to AI) is at play here. A leading provider of mission-critical logistics tools, Descartes’s entire underlying business model is being called into question, given the powerful tools on the horizon which could reshape this sub-segment of the tech sector.

That said, Descartes has proven to be a dependable market-beater, posting strong long-term share performance and a valuation that has typically warranted a premium. Today, that premium has sufficiently dissipated to make this stock an attractive bet. That is, for those who think sticky software businesses with relative moats can provide long-term upside. I know I do.