Turn a $6,000 TFSA Contribution Into +$190,000 With This Top TSX Tech Stock

Get absolutely unreal TFSA growth with this top TSX pick in the technology sector!

| More on:
Overhead shot of young adults using technology at a table

Image source: Getty Images

As far as capital appreciation goes, Constellation Software (TSX:CSU) has been as consistent an investment as any over the past 10 years. This is a stock that has a proven track record of outperformance, with returns of more than 3,200% over the past 10 years. For those with a 10-year investing time horizon for their TFSA, similar performance over the next decade could net someone around $185,000 in tax-free capital gains.

Of course, that’s if history repeats itself. As we’ve seen with many growth companies, this hasn’t been the case. That said, Constellation is about as consistent as it gets in this regard. Accordingly, I see no real reason why this performance cannot continue over the next decade. Indeed, this stock continues to be one of my top picks for TFSA investors.

It’s all about shrewd acquisitions

Constellation’s strategy of acquiring smaller software companies with core products that address important niche markets has been truly incredible. The company has grown to become a massive collection of integrated software solutions. Targeted and well-timed acquisitions of successful companies is the foundation of this amalgamation strategy.

I think a lot of the success Constellation has had is due in large part to the company’s CEO Mark Leonard and his M&A team. Constellation has been able to acquire excellent cash flow-producing software businesses at reasonable prices. This is certainly not an easy task to accomplish in this day and age. Furthermore, integration within Constellation’s portfolio also brings various synergies and growth opportunities for the acquired software companies. Accordingly, these investments tend to do much better under Constellation’s portfolio than on their own.

I think the timing is right for more acquisitions to come over the next decade. The software sector continues to be extremely fragmented, with thousands of potential targets for Constellation to go after. Acquisition financing is very cheap, and Constellation has more than enough balance sheet room to ramp up its acquisition pace moving forward. This has the potential to accelerate cash flow growth that continues to beat the TSX over the long term.

Bottom line

This is a company that has held its own in terms of growth in the software space in recent years. That goes both domestically and internationally. Mark Leonard has decided to never split this company’s shares. The company’s focus has been on building a loyal, long-term investor base. I think the long-term focus of this company and its strategic approach to consolidating a fragmented industry are very bullish for TFSA holders looking for an investment that should do well over a decade-long time horizon. Thus, I would highly recommend TFSA investors consider putting their 2020 TFSA contribution to work on this stock.

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.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Software.

More on Tech Stocks

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Businessman holding AI cloud
Tech Stocks

AI Will Transform Everything: Investors, Be Early Adopters and Buy These 3 Stocks

Investors looking to invest in companies doing big things in AI should consider these three stocks for their portfolios.

Read more »

stock research, analyze data
Tech Stocks

Forget Shopify: These Unstoppable Stocks Are Better Buys Today 

Should you consider buying Shopify stock while rivals consider a buyout or should you go for stocks with a stronger…

Read more »

A colourful firework display
Tech Stocks

2 Potentially Explosive Stocks to Buy in March

These two growth stocks are destined for many more years of market-crushing returns.

Read more »

edit CRA taxes
Tech Stocks

TFSA Millionaires Are Learning They Can Still Be Taxed

If you day trade stocks like Shopify (TSX:SHOP) in a TFSA, you may be taxed.

Read more »

Shopping and e-commerce
Tech Stocks

Where Will Lightspeed Stock Be in 5 Years?

Lightspeed stock (TSX:LSPD) continues to be touch and go, so what might happen in the next five years?

Read more »

Technology
Tech Stocks

Here’s Why Constellation Software Is a No-Brainer Tech Stock

Are you looking for tech stocks to add to your portfolio? Constellation Software is a no-brainer!

Read more »

Businessman holding AI cloud
Tech Stocks

2 AI Stocks That Wall Street Likes Better Than Nvidia

NVIDIA (NASDAQ:NVDA) may be trendy but Shopify (TSX:SHOP) has more upside according to Wall Street.

Read more »