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How to Turn a $50,000 RRSP or TFSA Into $500,000

Businessperson's Hand Putting Coin In Piggybank
Businessperson's Hand Putting Coin In Piggybank

Written by Aditya Raghunath at The Motley Fool Canada

Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) are hugely popular registered accounts in Canada. These accounts can hold a variety of investments, such as stocks, bonds, mutual funds, and exchange-traded funds.

Its imperative to consistently contribute towards your TFSA and RRSP each year and take advantage of the tax benefits associated with these accounts. If you have a long-term investing horizon, it makes sense to buy and hold quality growth stocks in your RRSP and TFSA, which will allow you to turn a $50,000 investment into $50,000 within the next two decades.

The ongoing pullback also allows Canadians to buy growth stocks at a discount. Here, I have identified three growth stocks that can be held in your TFSA or RRSP in 2022.

Aritzia

Aritzia (TSX:ATZ) was founded in 1984 and is a vertically integrated design house that offers everyday luxury products. It initially started as a multi-channel retailer and is now gaining traction in the e-commerce segment as well, with a growing footprint in the United States.

The company has a proven record of profitable, organic growth, and Aritzia’s free cash flow generation reinforces its strong financials. Aritzia is now accelerating investments across its strategic growth drivers, including e-commerce, geographic expansion, product innovation, and brand awareness.

Aritzia has increased its sales from $875 million in fiscal 2019 to $1.5 billion in fiscal 2022. Analysts expect sales to touch $1.9 billion in fiscal 2023 and $2.16 billion in fiscal 2024, valuing the stock at 2.5 times forward sales. In the fiscal third quarter of 2023 (ended in May), Aritzia increased sales by 65% to $408 million.

ATZ stock is currently trading at a discount of 30% compared to analyst price target estimates.

Jushi Holdings

If you are bullish on the cannabis sector in the United States, it makes sense to add Jushi Holdings (OTC:JUSH.F) to your TFSA or RRSP portfolio. Trading almost 80% below all-time highs, Jushi Holdings is valued at a market cap of US$380 million.

A vertically integrated cannabis company, Jushi Holdings is engaged in the cultivation, processing, retail, and distribution of medical and recreational marijuana products. It continues to build a portfolio of cannabis assets in California, Illinois, Nevada, Massachusetts, Virginia, Ohio, and Pennsylvania.

In the second quarter (Q2) of 2022, Jushi reported revenue of US$72.8 million, an increase of 52.4% year over year. It ended the quarter with 33 retail locations in the United States and is forecast to increase top line to US$388 million in 2023, up from US$209 million in 2021.

Analysts expect shares of Jushi to more than double in the next 12 months.

Constellation Software

One of the largest tech companies on the TSX, Constellation Software (TSX:CSU) has created massive wealth for long-term investors. Down 17% from all-time highs, CSU stock has returned over 14,000% to investors since it went public back in 2006.

Constellation Software provides software services to enterprises across industries. It develops specialized, mission-critical software solutions to address specific industry needs, which ensures switching costs are high. Constellation Software has grown through a combination of acquisitions and organic growth and has successfully established a diversified customer base.

Despite its stellar returns, CSU stock is valued at 30 times forward earnings, which is quite reasonable, given analysts expect the bottom line to expand by 20% annually in the next five years.

The post How to Turn a $50,000 RRSP or TFSA Into $500,000 appeared first on The Motley Fool Canada.

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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends ARITZIA INC and Constellation Software.

2022