What’s up guys, it’s wiz.
Welcome back to the channel. If you are new, I am a Canadian investor. I cover a whole lot of information about investing in Canada and do research into our Canadian market. I dive into growth investing, dividend investing and Canadian small caps / penny stocks. In the current environment, most investors are risk averse. The market is actively seeking ways to preserve capital, which means growth isn’t the top priority, value and defensive stocks are. However, I believe this could be the best chance to make a positive bet on growth stocks. Undervalued growth stocks could face some pressures in the short time, but over time, they can exceed inflation by a long shot. Today I will go over 3 Canadian growth stocks that could see some great consistent capital gains. For new investors, you need to join Wealthsimple Trade if you are looking to start investing and live in Canada. If you use my link in the description to join Wealthsimple, you get 2 free stocks worth up to 4500$ so do not miss out.
The first stock, with a market capitalization of over $43 billion, Constellation Software (ticker symbol CSU) features among Canada’s most valuable technology firms. Constellation Software stock has reported positive returns in 15 consecutive calendar years. These sorts of compound returns have rarely been seen by any technology company, let alone a Canadian tech giant. However, Constellation’s long-term aggressive acquisition strategy has made this so. Acquiring more than 650 companies over its history, CSU has become a big-time player in the software space. This company continues to acquire and integrate companies into its portfolio successfully. Over the long term, the success metrics on the company’s rollup strategy are impressive. Accordingly, investors seeking long-term growth may want to consider this stock. Sure, this company isn’t cheap. However, this stock is priced where it is for a reason. This enterprise software giant has lost 10% of its value year to date. In fact, the stock price has been range bound since August 2021. However, the company’s underlying fundamentals are still strong, and growth is expected to be robust for the foreseeable future. Constellation Software stock has delivered a compounded annual growth rate of 34% over the past 16 years! That rate is significantly higher than the decline in purchasing power over the same period. In simple terms, blue-chip tech stocks create value, despite market cycles. Now that the stock is facing pressure, long-term growth investors have the opportunity to buy it at a reasonable price. The stock currently trades at a price-to-free cash flow ratio of 26.3.
As mentioned, one of the key tenets of CSU’s growth strategy is mergers and acquisitions. This company has made dozens of acquisitions over the years and has continued to improve its acquisition targets’ returns over time. Recently, CSU announced that a subsidiary would be buying medical records company Allscripts Healthcare Solutions for US$700 million. This cash and stock deal is one that many investors think is prudent. Given the recent valuation compression we’ve seen, particularly around healthcare tech stocks, this deal is one which appears to be timed well. Allscripts’s business model is one that’s attractive, for those considering the long-term growth of this sector. This company’s software suite helps its clientele with workflow improvement, regulatory compliance, record-keeping, and billing. These key functions are ones software is well suited for, particularly in the context of improving productivity.One of the reasons I think CSU is a preeminent option for investors looking at software-related investments is the company’s strong forward-looking prospects. From a historical perspective, we’ve seen what this company has done. Over the long term, assuming CSU can continue to do what it has been doing, this growth is likely to continue. For those who like this recent US$700 million deal, this may be a signal of what’s to come moving forward. Personally, I’m on board with this strategy. CSU is a top Canadian tech growth stock to check out.
The second stock, we have Topicus.com (ticker symbol TOI). Last week, the stock gained about 8%. It still trades about 17% lower than where it started the year, but I would be a very big buyer at these prices. Like its former parent company, Constellation Software, Topicus is an acquirer of vertical market software businesses. With Constellation helping guide the company, Topicus has an excellent opportunity to become the next major stock market winner. Although it now operates as its own entity, Constellation Software still plays a vital role in Topicus’s success. Six members of Topicus’s board of directors are executives with ties to Constellation Software. This includes Constellation Software’s president and founder, Mark Leonard. If Topicus can lean on this very experienced board, then it could avoid some of the crucial mistakes that hinder a young company’s growth. This includes some of the mistakes Constellation Software may have made in the past. Topicus is a great company that investors should buy today. I believe an investment in this company today is similar to investing in Constellation Software in the early 2010s. In its first year of trading, Topicus stock gained nearly 50%. That includes the 33% decline Topicus stock endured in the second half of its first year on the public markets. If the company can continue to execute at a high level, it may not be long before it gets back to its previous all-time highs and be a top performing Canadian growth stock.
The third and final stock is Brookfield Renewable (ticker symbol BEP.UN). A stock you should hold in your portfolio if you believe the renewable utility industry has room for growth. The reason this company stands out from its peers is because it seems to have solved the most important issue that utility companies face: scalability. Companies that are unable to find a way to scale will ultimately have a difficult time competing on a global level. Brookfield Renewable already operates a portfolio of assets capable of generating more than 21,000 Megawatts of power. After the completion of its current construction projects, Brookfield expects its generation capacity to more than double. Last week wasn’t as great for Brookfield compared to Shopify, but it seems as though the stock saw a boost in valuation earlier this year. From February 23 to March 10, Brookfield Renewable stock gained about 23%. The company also boasts a massive development pipeline, which features an estimated future generation capacity of 62,000 MW. That would cement Brookfield’s position atop the renewable energy industry. Renewables are only growing in popularity among investors and in terms of consumer demand. This is a top Canadian growth stock to look forward to.
Hope you guys enjoyed these top Canadian growth stocks that should rebound quite nicely in the long term. Please watch my previous videos on Canadian stock recommendations and let me know of any Canadian stocks you want me to look into and give my opinion on. Let me know in the comments, since I really want to expand my knowledge in the Canadian market. If you did enjoy this video, leaving a like really helps grow the channel! Thanks for watching, I’ll see you guys in the next video!