After the TSX Index briefly hit 20,000 points, Canadian stocks have pulled back for a breather. Already, 2021 has been a wild year. We have seen a massive rotation from growth stocks to value stocks. Likewise, we have seen speculative plays on the market like cryptocurrency rise and crash. Today, we once again see the emergence of meme stocks. AMC Entertainment has been driven up 2,200% in just a few weeks!
Forget meme stocks and buy these smart TSX stocks
While these quick gains can be appealing, investors need to recognize that it is not investing. There is no fundamental or business reason why AMC would rise so much in this period of time. The problem is, the fall of such stocks can be just as drastic as the rise.
So be careful when speculating. Certainly, if you have some “play” money you can afford to lose, then speculating is perhaps okay. However, if you are looking to really build wealth in a stable, consistent manner, here are two smart TSX stocks you could consider in June.
Constellation Software: A leading TSX technology stock
Constellation Software (TSX:CSU) is one of the best-performing stocks on the TSX over the past decade. Since 2011, it garnered investors a 2,300% gain. Yet, year after year this company’s business keeps improving. Constellation is a consolidator of vertical market software businesses.
What I like is that these businesses are often essential to their customers. While their market may be smaller, they are often the leader of their segment. Constellation then provides capital, mentorship, and best practices to make these businesses even better. The businesses often become cash cows. Constellation can then take the proceeds and reinvest them into new businesses. It’s a wonderful cycle of compounding capital.
You need to be patient with this TSX stock, but it has one of the best management teams in the world. It continually reinvents itself and looks for new opportunities to accrete shareholder value.
It recently spun off Topicus.com, which is an attractive European-focused tech business in its own right. Likewise, it is now focusing on larger vertical software businesses. Given its history, I have no doubt this company will find accretive ways to unlock value for shareholders for a very long time.
Brookfield Asset Management: A top alternative asset manager
Another smart TSX stock to buy is Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM). When we speak about great managers, Brookfield definitely ranks up there. As one of the largest managers of alternative assets, this management team really knows how to allocate capital. Generally, it takes a very contrarian approach to investing. It buys assets in market crashes and sells them at market peaks.
Right now, this business is harvesting assets that are mature. Consequently, in its most recent quarter, this TSX stock produced record earnings and funds from operations. As a result, it has a pristine balance sheet today and ample capital to keep growing its asset base.
With interest rates near all-time lows, this business continues to benefit from institutional capital flowing to alternative assets. Bonds simply cannot collect the same risk-adjusted cash flow that a piece of infrastructure or real estate can.
As a result, I believe it will continue to see its asset-under-management rise. That all means more fee-related earnings and the potential for long-term carried interest. To me, this is a smart TSX stock to own today and for a very long time.
