Tech stocks have been having an interesting month. The biggest tech names have collectively lost several billions in market value over the past few weeks alone. This drop may create opportunities for savvy investors. However, I believe the opportunities are more attractive if the stock is flying under-the-radar.
Tech stocks that have avoided mainstream attention could be more fairly valued. That means they have less room to drop if investor sentiment sours. They could also have much more room to grow when investors finally catch onto them.
With that in mind, here are my top two stock picks with incredible growth potential.
On February 1, Canada’s most successful enterprise software company Constellation Software (TSX:CSU) decided to spin off its European subsidiary. The subsidiary is now listed on the Venture Exchange as Topicus.com Inc. (TSXV:TOI). Effectively, this is the Constellation Software of Europe.
Europe’s enterprise software sector is impressive but underfunded. European investors are far more conservative than their North American counterparts. That means software companies are undervalued, which creates an immense growth opportunity for Topicus.
Topicus has a market capitalization of $2.6 billion. That’s far smaller than its former parent company, Constellation. If it can replicate the growth-by-acquisition strategy of Constellation in Europe, Topicus could have a chance of delivering tremendous growth in the decade ahead. I consider this a long-term growth stock.
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Cutting-edge tech stock
The crypto industry has already rewarded early adopters handsomely. Few other industries have this sort of growth potential. Alas, Bitcoin is now mainstream and crypto mining stocks are starting to look overvalued, which is why Banxa Holdings (TSXV:BNXA) is so attractive.
Flying under-the-radar, this recently listed crypto payments company has a lot of potential. The platform allows users across the globe to convert their traditional fiat currencies into crypto. It could be the Lightspeed POS of the crypto sector.
As the value of Bitcoin and other cryptocurrencies rise, Banxa’s transaction volumes should swell too. The company has already had a major spike in revenue and transaction volume over the past year. The stock, meanwhile, has doubled since late-January.
Banxa has BTC and other crypto on its balance sheet that enhances value further. Meanwhile, the stock is trading at just ten times sales. If the company can sustain its current pace of sales growth and international expansion, it could deliver a windfall for early investors.
Overlooked tech stocks have the most potential. Their undervaluation creates an opportunity for early investors. The two stocks on this list are both worth a closer look if you’re a growth investor.
Topicus could replicate Constellation Software’s success in Europe. Meanwhile, Banxa could turn into the Lightspeed POS of crypto. Both offer tremendous growth opportunities for the years ahead. If you’re looking to add exposure to the tech sector, these two are worth a closer look.
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 Vishesh Raisinghani owns shares of Banxa Holdings Inc. The Motley Fool owns shares of and recommends Topicus.Com Inc. The Motley Fool owns shares of Lightspeed POS Inc.