Compounding happens when a company makes a profit. This income is then reinvested in growth opportunities with a high return. Rinse and repeat that cycle over years and decades, and you can get a wonderful multiplication of capital. Add to that the power of tax-free preparation and the process speeds up even faster.
If you’re looking for some great Canadian composite stocks, here are three to consider adding now.
A disciplined compounder with years of growth ahead
Even Constellation software (TSX:CSU) shares are down 26% this year (the biggest drop ever), it’s still one of Canada’s best performing stocks. The formula has not changed in more than twenty years: acquire niche software companies, let them operate independently and reinvest the cash flow in more acquisitions.
Certainly, growth is slowing. Still, it is very likely that growth in the mid- and high-teens will continue for many years to come. Constellation still has a huge market to consolidate.
What makes Constellation a TFSA-friendly stock is the stability of its recurring revenue and the discipline of its capital allocation strategy. After the pullback, Constellation’s valuation is very reasonable. It’s a great opportunity to add one of Canada’s best companies.
A TFSA share with long-term growth behind it
WSP worldwide (TSX:WSP) is one of the largest engineering and consulting firms in the world, active in the areas of transportation, infrastructure, mining, energy, energy and the environment.
It is a leader in many of these sectors. The diversified mix has helped the company gain market share as customers rely on it for more and more functions (from design to project management to asset management).
WSP’s earnings before interest, taxes, depreciation and amortization (EBITDA) growth was strong. It has risen into the high teens by 2025. The backlog continues to expand across multiple regions.
IWSP responds perfectly to themes such as a global infrastructure renewal cycle, urbanization, climate change, electrification and the development of data/artificial intelligence infrastructure. Within a TFSA, you want to own companies that have long-term structural tailwinds supporting their growth.
A stable, recession-proof composition for a TFSA
Waste connections (TSX:WCN) isn’t flashy. In fact, it’s as boring as garbage. This makes Waste Connection’s business remarkably sustainable.
Waste collection is a regulated sector with high barriers and predictable demand. Waste Connection differentiates itself by focusing on secondary markets where it can have a competitive advantage and maintain pricing power. That helps it achieve EBITDA margins in the +30% range.
The company invests in technology and acquires niche waste providers. Low earnings growth for teens is expected. The stock has unusually fallen nearly 10% in the past six months. Now is a great time to add this defensive, high-quality Canadian stock to your TFSA now.
The silly takeaway
Together, these three Canadian stocks offer a mix of stability, structural tailwinds and compound strength. It’s a very suitable mix for a TFSA designed to grow quietly and tax-free for decades.
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