Millennials ought to give their TFSA portfolios a jolt with high growth stocks to ensure their nest egg is large enough by the time they hit retirement age.
While it’s good to hedge your bets in the latter stages of a bull market, it’s also not a good idea to play it too safe while you wait for the next financial crisis to brew. Because like it or not, the bull still has its legs, and should geopolitical issues resolving themselves over the coming months, the markets could be headed a heck of a lot higher. In order to secure a comfortable retirement for yourself down the road, you’re going to need to stay in the market before it pops, not after.
Consider Constellation Software (TSX:CSU), one of Canada’s top-tier tech titans, whose stock has posted a massive over 400% in total returns posted over the last five years despite not getting as much attention from many Canadian investors.
Absurdly expensive? Or a fair price for a wonderful company?
The stock seems expensive at nearly 29 times next year’s expected earnings, but when you understand what you’re paying a premium for, only then does it become clear that Constellation may actually be a value play as far as growth stocks are concerned. As such, Millennials shouldn’t shun the name upon learning of its high P/E multiple.
Here a handful of reasons why Constellation is well worth the high price of admission:
First, you’re getting consistently high double-digit top- and bottom-line grower. As of the end of last year, Constellation has averaged 24.9% and 38.1% in revenue and EPS growth, respectively, over the last decade. The icing on the cake is the stock’s lower-than-average 0.86 beta and the smoother ride up, which is extremely attractive for smart-beta folks who value both momentum and low volatility.
Second, Constellation has exceptional stewards who know how to spot value within the micro- and small-cap tech space. Just think of Constellation as a scaled-up Canadian venture tech fund with some of the most seasoned managers out there. Management has found a way to deliver outsized returns to investors, and as long as they’ve still got the magic touch, Constellation will continue to find opportunities where nobody else is looking.
Third, Constellation has demonstrated that its growth-by-acquisition model is highly replicable. When it comes to micro and small-cap up-and-coming tech players, there are plenty of fish in the sea, and with that comes a ridiculous amount of potential opportunities and as long as Canada’s tech scene is doing alright.
Don’t make the mistake of passing up on Constellation Software just because it’s had a great run. The run will most likely continue for many years, so don’t think that the easy money has already been made because Constellation Software is still largely under the radar compared to most other companies posting such massive and consistent growth.
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned. Constellation Software is a recommendation of Stock Advisor Canada.