Seeking long-term winners is one of the most enjoyable parts of investing, as investors who are skillful and lucky enough to buy and hold one of these names could see life-changing returns, making the investing effort worthwhile.

In addition, owning these names has proven to be a highly cost-efficient way to compound capital as investors practically do not pay any taxes (given investors do not sell), and capital gains are taxed at a more favourable rate compared to dividends and interest income most of the time. 

This screener will do a rear-view mirror exercise to look back at Canadian companies that have returned at least 10x investors’ money in the last ten years, and whether these are still attractive investments today. 

Below we have screened for companies with the following criteria:

• Market cap larger than $50 million
• Positive return on equity (ROE) on the trailing twelve-month basis
• Return of at least 900% (or 10 times) over the last ten years

Here is the screener:

 The criteria for the screen are quite simple as we screen companies that are over $50 million, these companies do have decent operating track records for investors to evaluate, also these companies are more liquid in trading volume, allowing investors to acquire positions more comfortably. Secondly, we screen for companies with a positive Return on Equity (ROE) in the last twelve months, this is not a high bar to achieve, but it practically includes companies that are within the universe of profitable, investable companies. Lastly, we screen for companies that have 900% returns or more (equivalent to a 10x return), some companies even surpass that high bar.

The screener came up with 8 names, members will recognize some of the names that we cover in our Model Portfolios and coverage lists such as Hammond Power Solutions (HPS.A), Constellation Software (CSU) and TerraVest Industries (TVK).

Although some are much larger in size now given their impressive returns, some of them are still relatively small, under a $1 billion market cap. In addition, most of these names have consistently grown by double-digits over the last few years such as CSU, TVK, HPS.A, GSY, etc. As a result, despite a decent run, they still look like attractive candidates for long-term holdings. We think another 10x is an optimistic and aggressive target but could be achievable given that these companies continue to execute and maintain their industry competitive positions, provided a long enough timeframe.

A few key lessons from this screener are:

1)    It is not the buying, but holding that is the hardest part of long-term investing, as investors would constantly be tempted to take some chips off the table.

2)    As a result of these huge outliers, a portfolio will be naturally concentrated in such a few of these names, we think this is a nice problem to have, but investors need to consider their individual comfort levels and ‘sleep-well-at-night’ position sizing.

3)    Winners keep winning, let them run. Over the timeframe of at least a decade, investors should have gone through a few challenging macro environments such as recessions, geo-political turmoil, interest rate hikes, inflation, etc. Conviction matters in the long term. Hold them tightly as long as the company continues to execute.

4)    Small is beautiful, some of these names are still growing at a healthy pace even to this day and could 10x investors’ money if the competitive advantage of the companies is still there and management keeps executing.

Again, these companies on the list are not recommendations but a starting point that helps investors generate potential investment ideas and strategies. Investors can view our previous screener blog here. 

Unlock the Power of Informed Investing with 5i Research!

DIY investing doesn't have to mean going it alone. At 5i Research, we're your trusted partner in navigating the stock market. Our platform offers comprehensive stock and market research, empowering you to make smart investment decisions. 

• Investor Q&A: Have burning questions? Get answers from our team of experts and fellow investors in our dedicated Q&A section.
• Research Reports: With over 60 meticulously researched Canadian stocks, our reports offer in-depth analysis, giving you the confidence to invest wisely. 
• Model Portfolios, Alerts, Forums, Portfolio Tracking, and Much More...

Take Care,

Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.