The Bank of Canada’s long-term inflation target is a 2% annual increase. As of April, Canada’s inflation rate was at 2.2%. It’s unclear whether inflation will continue to increase, but the Bank of Canada has previously stated that it doesn’t expect to meet its 2% target until at least 2023. With that said, investors need to be even more conscious about this since higher inflation rates will eat away at your returns. In this article, I will provide three stocks that can help you stay ahead of the game.
Trust in this top growth stock
The best way to beat inflation is to invest in the best growth stocks. Companies like Shopify (TSX:SHOP)(NYSE:SHOP) can certainly provide an increase much greater than the 2% inflation rate. Although many investors would consider this a slow year by Shopify’s standards, the stock has already returned 7% year to date. This includes a previous decline of as much as 32% in Shopify stock earlier this year.
Since its IPO, Shopify stock has been a compounding monster. The stock has provided investors with an average annual return of 89.97% since inception. In terms of dollars, $10,000 invested in Shopify stock at its IPO would be worth more than $471,000 today. This significantly outpaces the TSX, which has provided an average annual return of 4.26% over the same period, slightly edging out the inflation rate. Shopify recently reported a 110% year-over-year increase in its quarterly revenue, suggesting the company isn’t nearly done growing just yet.
We’re issuing a BUY alert on this TSX space stockClick here to learn more!
This stock is a reliable compounding machine
Another reliable stock to consider for your portfolio is Constellation Software (TSX:CSU). The company has made a name for itself by acquiring small- and medium-sized vertical market software companies. Throughout its history, Constellation Software has acquired more than 500 businesses. Earlier this year, Constellation’s president and founder Mark Leonard stated that the company would expand into the acquisition of large businesses. This could be a massive move for the company, if everything goes to plan.
Since October 2007, Constellation Software stock has returned nearly 8,500%. This can be translated to an average annual return of 38.79%. Over the same period, the TSX has returned 2.41% on an annual basis, essentially on par with the long-term Canadian inflation rate. Constellation Software may not be a young company, but its management team is still heavily dedicated to finding superior returns. Constellation stock has already returned about 7% this year.
Don’t miss out on this recent IPO
It should be noted that the next company has a much shorter history, which makes it more difficult to predict how the stock could move in the future. However, since its IPO, Nuvei (TSX:NVEI) has been nothing but spectacular. The company provides an omnichannel payment solution in 200 global markets and accepts 450 payment methods in 150 currencies. Led by its award-winning founder and CEO Philip Fayer, Nuvei looks like it could be the next big tech stock.
Since its IPO, Nuvei stock has returned 88.3%. On an annualized basis, this becomes 131.55%. As mentioned previously, it’s tough to extrapolate this return over a longer term, since it hasn’t even been a year since the company’s IPO. However, it should be noted that the stock is up nearly 27% this year, whereas most other growth stocks have returned less than 10%. This is a stock you don’t want to miss out on.
Interested in another stock that could help you beat inflation?
Our team of diligent analysts at Motley Fool Stock Advisor Canada has identified one little-known public company founded right here in Canada that’s at the cutting-edge of the space industry and recently completed a transformational acquisition, all while making a handsome profit in the process!
The best part is that in a market where many stocks are selling at all-time-highs, this stock is trading at what looks like a VERY reasonable valuation… for now.
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 Jed Lloren owns shares of Shopify. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Constellation Software, Shopify, and Shopify and recommends the following options: short January 2023 $1160 calls on Shopify and long January 2023 $1140 calls on Shopify.