Somehow BlackBerry (TSX:BB)(NYSE:BB) stock has joined the recent meme-stock craze. Earlier this year, BlackBerry stock was driven up by 270% in just a matter of a few days. Then over the subsequent four months, the stock collapsed 67%. Once again, however, this stock has recently been driven up by over 60% by meme stock traders.
Thinking about buying BlackBerry stock? Maybe you should think again…
Does this recent market rise have your interest peaked in catching some quick gains? I would suggest being very cautious. There is nothing fundamentally supporting the rise in BlackBerry’s stock price. While BlackBerry is not a bad technology business, it also isn’t the greatest.
For years, this business has consistently underperformed and failed to meet market expectations. Not only that, but BlackBerry has some horrific corporate governance policies. Its management team has profited from oversized compensation packages, despite lagging performance to most peers.
Given some of these issues as well as its elevated valuation today, BlackBerry is one stock I would not trade. If you want to build some real sustainable wealth, here are two top Canadian stocks I would look at owning for the long run instead.
This stock has outperformed BlackBerry by over 2,400%
How would you feel about earning a 2,381% return over the next 10 years? Compared to BlackBerry, that is real stock market outperformance! That is an annual shareholder return of nearly 38%!
Well, that is exactly what Constellation Software (TSX:CSU) has delivered for shareholders over the past decade. Today, this technology stock has a market capitalization of $38.6 billion. Certainly, due to the law of large numbers, this stock will probably not keep growing at the same rate as prior.
However, in terms of governance, capital allocation, and management expertise, Constellation’s stock is far superior to BlackBerry (and likely any meme-stock you can buy today).
Management treats shareholders like partners. Its ability to consistently build fundamental shareholder value speaks for itself. You will have to be patient, but I expect this stock to keep doubling as management pursues its aggressive capital compounding strategy.
An up-and-coming Constellation stock
Interestingly, Constellations is getting a bit more creative about unlocking shareholder value. This year, it began focusing on larger market vertical acquisitions. This will give it a broad new range of niche businesses to add to its portfolio. As well, Constellation spun off a unique part of its business on the TSX Venture exchange.
In February, it formed Topicus.com (TSXV:TOI) as way to merge two fast-growing software businesses in Europe. Topicus.com is utilizing Constellation’s consolidation strategy to acquire niche software businesses across the Netherlands and Europe at large.
Yet, what makes it unique from Constellation is that it also has a strong organic growth profile as well. This means a portion of its business is expanding but at very little incremental cost. As a result, it can produce very attractive margins.
This company has a very sticky revenue base. It provides essential software services to education, financial, and healthcare institutions. Unlike BlackBerry, this stock has a strong growth trajectory. In its recent first quarter, it grew revenues and free cash flows by 50% and 19%, respectively.
A stock for the next 10 years
Right now, Topicus mainly operates in the Netherlands, but there are ample opportunities to expand organically and through acquisition across Europe. Consequently, I believe this stock is still in the very early stages of its growth plan. I can’t say the same for BlackBerry stock, however.
Hence, I would much rather bet my chips with this up-and-coming “Constellation-like” business for the next decade to come!
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 Robin Brown owns shares of Constellation Software and Topicus.com. The Motley Fool owns shares of and recommends Constellation Software and Topicus.Com Inc. The Motley Fool recommends BlackBerry.