RRSP Investors: 2 Hot Stocks That Could Continue to Rise in 2023
Written by Christopher Liew, CFA at The Motley Fool Canada
Canadians use the Registered Retirement Savings Plan (RRSP) to save for retirement or build retirement wealth. Moreover, all contributions to this registered savings plan are tax deductible. But with another tax season coming, many RRSP investors hope to lower their tax payables by contributing the maximum.
If you want to take advantage of this feature, the deadline for 2022 contributions is March 1, 2023. All contributions past this date will not be eligible for deduction for the 2022 taxation year. Also, to ensure you don’t pay penalties, the RRSP contribution limit is 18% of your earned income, up to a maximum of $29,210.
Hot stocks for your RRSP
RRSP investments grow tax free, so it would be best for users to hold income-producing assets in the account, not just cash. Most account holders prefer to hold stocks because of potentially higher returns. If your finances allow you to contribute the maximum, set your sights on two hot stocks.
Non-energy stocks Sierra Wireless (TSX:SW) and Uni-Select (TSX:UNS) were red hot in 2022, with impressive returns of 75.9% and 66.4%. Given their solid fundamentals and bright business outlooks, both stocks should continue to rise in 2023.
Public safety champion
Sierra Wireless is well known in the globally connected economy for its Internet of Things (IoT) solutions. This $1.62 billion company develops industry-specific solutions for their IoT deployments. These IoT solutions combine devices, network services, and software to help companies improve operational efficiency and business models.
In the nine months ended September 30, 2022, the net loss improved 86.7% year over year to US$10.3 million. Sierra’s revenue from IoT Solutions in the third quarter (Q3) 2021 jumped 124.2% to US$120.3 million because of the strong demand for connected devices globally. Management said the realization of investments in inventory to combat the ongoing supply chain tightness also contributed to IoT revenue growth.
Today, Sierra Wireless has a full solution (uninterrupted and around-the-clock communication) for the extended public safety community when disaster strikes. The solution includes a Sierra Wireless device, FirstNet connectivity, and a purpose-built, cloud-based dashboard. It allows extended public safety users to have confidence that their critical communications stay intact when they need it most.
Strong market position
Uni-Select distributes automotive refinish and industrial paint plus related products in North America. The $1.89 billion company is also a dominant force in the automotive aftermarket parts industry in Canada and the United Kingdom. Despite a challenging environment, the business continues to realize organic growth and generate substantial free cash flow (FCF).
After three quarters in 2022, FCF climbed 56.1% to US$112.1 million versus the same period in 2021. Notably, net earnings reached US$52.94 million compared to a net loss of US$8.11 million from a year ago. Management said currency translation, labour, and inflation are severe challenges to the business today.
Nonetheless, its executive chair and chief executive officer Brian McManus, is confident that volume gains and synergies from recent acquisitions would drive organic growth in 2023. Uni-Select will also pursue acquisition opportunities to strengthen its market position.
Top-performing growth stocks
Expect Sierra Wireless and Uni-Select to beat the market again in 2023 and reward RRSP investors with meaningful capital gains. Both are top-performing growth stocks, as evidenced by the +232.98% and +288.3% total returns in 3.01 years, respectively.
The post RRSP Investors: 2 Hot Stocks That Could Continue to Rise in 2023 appeared first on The Motley Fool Canada.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.