TFSA investors: 2 stocks to buy in 2021
Canadians can deploy an additional $ 6,000 to their Tax Free Savings Account (TFSA) this year. Fortunately, stocks have been going down for a few months, which means that some good business opportunities have appeared.
Here are the top two stocks I think you should keep an eye out for in 2021.
TFSA 1 shares
Suncor Energy (TSX: SU) (NYSE: SU) is a top pick for 2021. The oil and gas giant is expected to peak in its underlying commodity. As the global economy reopens, analysts expect fuel sales to skyrocket. The higher price of crude oil should improve Suncor’s sales.
Over the past year the company has changed its attention to high margin products and its sustainable and integrated assets. This should translate into better margins and stronger cash flow in the second half of 2021.
Meanwhile, investors have not fully integrated this price into the stock. Although the stock has risen 74% in the past year, it still trades at 1.2 times book value per share and 1.7 times sales per share.
Suncor’s shares offer a 3.2% dividend yield and management is actively repurchasing its shares. This undervalued security should be on your TFSA watchlist.
TFSA 2 shares
Topicus.com (TSXV: TOI) is another TFSA stock that deserves your attention. Most investors may never have heard of this little-known company, but they are likely familiar with its former parent company: Constellation software.
Topicus was the European subsidiary of Constellation. It focuses on acquiring niche software companies across the continent and was split earlier this year as Constellation focuses on new avenues of growth.
The company’s existing portfolio of software platforms serves more than 100,000 customers in 14 countries. Over the past year, Developed topicus revenues, net income and free cash flow of 18%, 37% and 25%. As you can see, the growth rates for free cash flow and net income are close to our compound annual growth rate (CAGR) threshold of 26%. If the company can maintain this pace over the next decade, investors should enjoy a windfall.
What is more encouraging is the fact that the European software market is untapped and undervalued. Local software companies are just as innovative as their American counterparts, but tend to attract less capital. This creates a unique opportunity for companies like Topicus to get started and close deals at great deals.
In other words, Topicus could replicate Constellation’s success over the next decade. That’s why this TFSA title should be on your radar.
At the end of the line
Growth stocks have seen an incredible run over the past year. However, this rate of growth cannot be sustained. Investment returns are usually spread over many years, if not decades, and it looks like we are entering a slower pace of growth in the stock market.
This means that investors should moderate their expectations and aim for more robust and stable companies. Companies like Suncor and Topicus have intrinsic factors that make them very attractive TFSA stocks for 2021.
Looking for more quality inventory? Here is a list.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool service or advisor. We are Motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we’re posting sometimes articles that may not meet recommendations, rankings or other content. .
Silly contributor Vishesh Raisinghani has no position in any of the listed securities. The Motley Fool owns shares and recommends Topicus.Com Inc.