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TFSA Investors: If You Could Only Buy One Stock, This Should Be It – The Motley Fool Canada



TFSA investors are a smart bunch. Permanently protecting your capital from taxes is an opportunity that no one should pass up.

While millions of Canadians invest through a TFSA, millions still do not. If you don’t have a TFSA, open one today.

If you already have a TFSA, then congratulations. Yet the battle is far from over. Now, you have to figure out how to invest your tax-protected savings.

Decades of research continually suggests that long-term investing is your best bet to build massive wealth. It can be tempting to constantly try to find the next big thing, but a buy-and-hold strategy has proven more successful.

Just take a look at Berkshire Hathaway, which has generated annual returns of 20% for more than three decades. That’s double the rate of the stock market overall in the same period. That doesn’t mean that a 30-year Berkshire Hathaway investor’s final sum would be twice as much. Due to compound interest, their nest egg would be considerably larger.

If you invest $10,000 and earn 10% annual returns for 30 years, you will end up with $175,000. Not bad. But what if you earned 20% annual returns? Keeping everything else constant, your $10,000 would become $2.4 million!

Long-term compounders are the secret to amassing wealth. Fortunately, there’s one Canadian stock that has all the characteristics of the next Berkshire Hathaway. In fact, this stock runs the same strategy as Berkshire, yet is less than 5% of the size, meaning it has decades of growth ahead of it.

Trust the process

Warren Buffett mastered the art of making money at Berkshire Hathaway. The holding company consists of several insurance businesses that throw off regular cash generated from policy premiums. That cash needs investing, which Warren Buffett happily does, buying huge chunks of both private and public entities.

Because insurance premiums are paid during both bull and bear markets, Buffett has the enviable advantage of fresh cash during every part of the economic cycle. When capital is scarce, Buffett can swoop in and secure once-in-a-decade deals, as he did during the 2008 financial crisis.

Prem Watsa, founder and CEO of Fairfax Financial Holdings Ltd (TSX:FFH), figured he shouldn’t fix what isn’t broken, opting to emulate Buffett’s strategy completely. Fairfax owns a number of insurance businesses, and Watsa invests the resulting cash.

Buffett has proven a masterful investor, but how about Watsa?

Since 1985, Fairfax stock has generated annual returns of 17%. That’s a bit below Berkshire’s performance, but it still makes Fairfax one of the best long-term compounders of capital in recent memory. Plus, there’s reason to believe Fairfax will outperform Berkshire in the decades to come.

The first problem with Berkshire is that Buffett, a major force behind its historical success, is now a stately 89 years old. Watsa, on the other hand, is only 69 years old.

Additionally, Berkshire Hathaway is now worth more than $600 billion. The law of large numbers suggests that it will be difficult for the company to grow at a market-beating rate into perpetuity. Another doubling in price would make Berkshire one of the largest companies on the planet. Another doubling after that would make it the largest corporation in history, by a long shot.

Fairfax, meanwhile, is worth just $17 billion. Even if it were to double in price twice, it would still be 10% the size of Berkshire. It’s not hard to deduce that Fairfax has many more years of growth ahead of it when compared to Berkshire.

The trick to long-term investing is to buy proven business models that have decades of runway to go. Fairfax checks all of these boxes. If you could only own one stock, this should be it.

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The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends FAIRFAX FINANCIAL HOLDINGS LTD and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares).

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

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Irving to buy North Atlantic Refining including refinery in Come By Chance, NL –



SAINT JOHN, N.B. — Irving Oil has signed a deal to buy North Atlantic Refining Corp., including a refinery in Come By Chance, N.L., from U.S. investment firm Silverpeak.

Financial terms of the agreement, which includes a network of gas stations and other marketing assets, were not disclosed.

North Atlantic provides fuel products to businesses and consumers across Newfoundland.

The refinery has capacity of 130,000 barrels per day.

Production at the refinery was stopped on March 30 due to the pandemic.

The sale is subject to regulatory review and other conditions.

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Number of Americans on jobless benefits inches down for 1st time since pandemic began –



The number of Americans continuing to receive government jobless benefits declined in the week ending May 16 for the first time since COVID-19 struck, even as millions of people continue to join the unemployment rolls.

The U.S. Department of Labour said 21.052 million people continued to receive benefits that week. That’s down from the record 24.912 million seen the previous week.

“The number of Americans who remain on UI is still uncomfortably high,” Bank of Montreal economist Jennifer Lee said, “but it is not at a record anymore and that is a start.”

The initial claims figure — which represents the number of people filling out applications for jobless benefits for the first time — held above two million last week for a 10th straight week amid second-wave layoffs in the private sector, such as the 12,000 announced this week by plane manufacturer Boeing.

Initial claims for state unemployment benefits totalled a seasonally adjusted 2.123 million for the week ended May 23, from a revised 2.446 million in the prior week. Economists polled by Reuters had forecast initial claims falling to 2.1 million in the latest week from the previously reported 2.438 million.

Though claims have declined steadily since hitting a record 6.867 million in late March, they have not registered below two million since mid-March. The astonishingly high level of claims has persisted even as non-essential businesses are starting to reopen after shuttering in mid-March to control the spread of COVID-19, an indication it could take a while for the economy to dig out of the coronavirus-induced slump.

“I am concerned that we are seeing a second round of private sector layoffs that, coupled with a rising number of public sector cutbacks, is driving up the number of people unemployed,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.

“If that is the case, given the pace of reopening, we could be in for an extended period of extraordinary high unemployment. And that means the recovery will be slower and will take a lot longer.”

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Profit falls at TD and CIBC as loan loss provisions soar –



Canadian Imperial Bank of Commerce (CIBC) and TD Bank Group missed quarterly earnings expectations on Thursday, as they set aside billions to cover future loan losses due to the COVID-19 outbreak.

The massive jump in provisions took the total amount set aside by Royal Bank of Canada, Bank of Montreal , Bank of Nova Scotia, National Bank of Canada , CIBC and TD Bank to $10.93 billion.

The money set aside for credit losses on both performing and impaired loans as a result of the COVID-19 pandemic and continued pressure on oil prices has added to pressure on Canada’s biggest lenders from decade-low interest rates.

Canadian banks have grown their oil and gas loan books faster than total lending in recent quarters, and their business loan books overall expanded during the second quarter as borrowers unable to access debt markets drew down credit lines.

CIBC posted an adjusted profit of 94 Canadian cents per share for the quarter ended April, compared with analysts’ expectations of $1.58 per share.

TD Bank, Canada’s second-biggest lender, reported an adjusted profit of 85 Canadian cents per share, missing estimates of 89 Canadian cents.

Net income was $1.5 billion at TD, down 52 per cent from last year. Net income was $392 million at CIBC, down 70 per cent from last year.

CIBC also reported lower net income across divisions and higher expenses. Controlling costs is particularly vital for CIBC, which has already said it expects expenses to grow this year at about double the rate of its rivals.

It flagged layoffs earlier this year to aid its efforts to cut costs and become more efficient.

CIBC set aside $1.41 billion in the quarter for future loan losses, compared with $255 million a year earlier, while total provisions for TD Bank jumped to $3.22 billion, compared with $633 million a year earlier.

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