Although the stock market is an excellent place for investors to create wealth, there are not many companies that present life changing opportunities. For example, let’s take a look at the S&P 500 Composite Index. Although the index has increased about 8% per year, on average, much of those gains are attributable to only a handful of companies. This is because the index is market cap-weighted, which means the largest companies affect its returns more than the rest of the index.
That means investors can’t choose just any company and expect a reliable return. It also suggests that there are a handful of companies that are capable of producing market-beating returns, which are able to pull forward even the worst companies. In this article, I will discuss two stocks that investors should buy and hold forever.
Canada’s most famous company today
Among all TSX-listed stocks, fewer companies have the same international recognition as Shopify (TSX:SHOP)(NYSE:SHOP). The company has grown from a small Ottawa startup to an international enabler of ecommerce. It is the first company that investors should consider buying to hold.
Today, more than 1,000,000 merchants use Shopify to power their businesses today. The company is the leading provider of online store building services within most English-speaking countries. What’s more interesting, is that Shopify’s largest market isn’t even Canada. China has the largest Shopify user base, which indicates that the company has done an exceptional job of attracting international merchants.
Since its Initial Public Offering (IPO) in May 2015, Shopify stock has gained more than 4,300%! This represents an annual growth rate of 95%. That means that if you had invested $10,000 into Shopify stock at its IPO, you would have about $450,000 today. After a very strong November and December, the company is poised to beat earnings at its next quarterly call on February 17. There is a good chance that the stock skyrockets after blowing expectations out of the water.
An oldie but goodie
Sticking to the tech sector, Constellation Software (TSX:CSU) is the second stock that investors should buy and hold forever. For new investors, there is a good chance that you may not be very familiar with Constellation. That’s because most of their business happens behind the scenes. However, the company’s performance since its IPO is very intriguing.
The company was formed in 1995 by Mark Leonard, who still serves as Constellation Software’s president today. Since then, he has helped the company grow into a tech holding conglomerate, with businesses serving many verticals. To date, Constellation Software has acquired more than 500 businesses.
Since October 2007, Constellation Software stock has gained nearly 7,500%, which represents an annual growth rate of 38.5! This means a $10,000 investment at that time would have turned into more than $750,000 today. This compares to a growth of 23.3% by the TSX, or an annual rate of 1.6% over that period.
Buying the best stocks will give investors the ability to beat the market over the long term. Shopify and Constellation Software are two examples of companies that have been pulling the TSX forward since their respective IPOs. Growth-oriented investors should consider buying these two stocks and holding them forever.
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.