TFSA Investors: 2 Top Canadian Stocks Worth Buying at $3,500

With just one trading week left in the first month of the new year, investors may be wondering what to do with their last $7,000 contribution to the Tax Free Savings Account (TFSA). There have undoubtedly been a lot of nerves to start the year. But the name of the game is long-term investing, especially if you’re a novice investor just getting a feel for what it’s like to be invested.

Volatility is the price to pay for having one of the best assets to grow one’s wealth over extended periods of time. If there were guarantees or anything else, the returns simply wouldn’t be as great. And with interest rates falling, taking smart risks with rewards that make it worth it is critical.

While others maximize return potential without considering the risk side of the equation, smart value investors prioritize the balance between risk and reward. In this piece, we’ll look at two great candidates that TFSA investors may want to consider for their latest entry. Perhaps $3,500 each could make sense for investors looking for something to buy before the month ends.

Aritzia

When it comes to hot stocks, Aritzia (TSX:ATZ) is a name that new investors may find very interesting. It’s an established retailer in Canada, but it’s a little less known in the US. But that could change over time as the company opens new stores south of the border.

Given the growth prospects for expansion that could continue to offset tariff headwinds, I’m inclined to label Aritzia stock as a long-term growth asset. Of course, the stock is no stranger to the odd bear market. And that may have already begun, as stocks recently corrected more than 13% from recent highs.

While the correction takes a lot of the buzz off the name, I still think there’s potential for shares to fall further, at least until the company has a chance to pull back the curtain on another blowout quarter. While Aritzia is getting its US rollout right while investing in operational efficiencies and new concepts to increase sales while driving traffic (think A-OK Cafe attached to many Aritzia stores in the mall), I think ATZ stock is actually still underpriced, even at an apparently fully valued price-to-earnings ratio of 30.6 times (that’s forward, not lagging).

If you’re a fan of the retailer and think its US expansion could be disruptive, I’d stick with ATZ. It is a premium growth stock in my opinion.

Loblaw

Loblaw (TSX:L) shares have been less exciting over the past year, but it’s hard to argue with the nearly 35% gain over the past year. It is a stable player with a fairly predictable earnings growth story. The big grocer is gaining ground and could remain a hot spot among Canadian consumers who continue to crave value and discounts even as inflation remains calmer. Of course, the discount grocer stands out as the ultimate way to do well in all environments.

Recession or productivity growth, Loblaw stock looks like a winner as management tries to do whatever it can to keep the hot multi-year run intact. With so many growth assets and excellent managers, I wouldn’t give up on the shares, even if they are a bit pricey at a price-to-earnings ratio of 30.7 times. The dividend yield of 0.88% is quite low, but forgivable, as the main attraction to L shares should be the potential for capital gains.

With a gain of over 307% in the last five years, Loblaw shows that you can make a lot of money while defending. While such returns are less likely over the next five years, I still view the name as a wonderful portfolio diversifier that can continue to impress.