Buy This Tech Stock During the Market Rally

Constellation Software Inc (TSX:CSU) is one of the top growth stocks in Canada. Shares look compelling as the stock market rally begins.

| More on:
Business man on stock market financial trade indicator background.

Image source: Getty Images

The coronavirus pandemic sent global markets into freefall, but the recent market rally has pushed stock prices higher yet again. There aren’t as many bargain as a few weeks ago, but some high-growth stocks are still trading at ridiculous valuations.

One Canadian tech stock is a clear buying opportunity. This stock has delivered 10,000% returns to long-term shareholders. The company is now worth nearly $30 billion, but it’s not difficult to see shares tripling in value over the next several years.

The market rally is underway. Don’t miss out on limited-time buying opportunities like this.

This is the stock

Constellation Software Inc (TSX:CSU) is a special stock. If you haven’t heard of it, pay close attention. This could be your top stock purchase during the market rally.

What exactly does the company do? It owns a wide portfolio of software products. The portfolio targets nearly every industry, including retail, energy, healthcare, manufacturing, and much more. Its software isn’t used by the general public. Instead, it helps businesses automate mission-critical processes. That last part of where the magic lies.

During a market rally, businesses look to reinvest earnings into new technology initiatives that will save time and money over the long term, resulting in more demand for Constellation’s products.

But what happens when the economy experiences a downturn? Yet again, Constellation wins.

When profits are falling, businesses look to cut costs at every turn. Because its portfolio is dominated by automation products, Constellation often sees a bump in demand as customers look to replace workers with software.

This really is a win-win situation for the company. No matter where the economy goes, Constellation can profit. Its share price is testament to that strength. It rarely goes on sale, even during a recession.

The market rally is here

As mentioned, Constellation’s business is barely impacted by economic swings, but its stock price can be pressured over the short term. These small dips have always been buying opportunities. They exist not because profits will fall, but because the majority of the market is ignorant that this is a recession-proof business.

There’s a reason why most investors haven’t heard of Constellation: It purposefully tries to keep itself under the radar because its business relies on acquisitions. The more news you have coming out, the more likely another bidder will come along and provide price competition. Keeping quiet is especially important during a market rally.

An acquisition-based approach to growing its product portfolio is yet another reason why Constellation comes out of any recession stronger than before. Private companies often see a greater reduction in their value during a bear market than do their publicly-traded equivalents. This is known as the private company discount.

There’s no doubt that Constellation is going bargain hunting right now. It could secure deals that will drive earnings growth for years to come. Yet Constellation stock trades at the same price as it did back in October of 2019.

The last time shares experienced a plateau like this was in 2018. Within weeks, the stock price rocketed to new highs, delivering rapid returns of more than 50%.

There are few TSX stocks more proven than Constellation. Despite the recent market rally, shares still look like a clear buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool owns shares of and recommends Constellation Software. Fool contributor Ryan Vanzo has no position in any stocks mentioned.

More on Tech Stocks

value for money
Tech Stocks

3 Tech Stocks Trading for a Significant Discount

These tech stocks have corrected quite a lot, despite the strength in their business, making them attractive long-term bets.

Read more »

Shopping and e-commerce
Tech Stocks

Shopify Stock: What Investors Should Do if it Falls to $300

Shopify (TSX:SHOP)(NYSE:SHOP) stock fell another 10% on Tuesday, as it nears the $300 range. So, what happens if that comes…

Read more »

consider the options
Tech Stocks

Will Enthusiast Gaming Stock Change Course After the Activist Attack?

Last week's cheer in Enthusiast Gaming stock is reversing this week.

Read more »

sale discount best price
Tech Stocks

Tech Selloff: 3 Bargains to Pick Up Now

Thanks to the current slump, you can buy many tech stocks at a discount price or valuation that's usually quite…

Read more »

TSX Today
Tech Stocks

TSX Today: What to Watch for in Stocks on Wednesday, May 25

Apart from bank earnings, TSX investors may want to keep an eye on the FOMC meeting minutes today.

Read more »

Wireless technology
Tech Stocks

3 Tech Stocks Worth Buying Today

Looking for tech stocks to add to your portfolio? Here are three top picks!

Read more »

Question marks in a pile
Tech Stocks

Should Canadians Be Worried About the Snapchat Stock Plunge?

Social media stocks lost US$180 billion in value on Tuesday, as shares of Snapchat (NYSE:SNAP) stock dropped by 41%, below…

Read more »

thinking
Tech Stocks

Is Lightspeed (TSX:LSPD) Still a Buy After its Huge Q4 Loss?

The e-commerce investments in Canada have taken a turn for the worst, which is either a signal to stay away…

Read more »