It’s often seen that stocks that offer growth spikes and bursts tend to offer better returns in a relatively shorter amount of time compared to what steady growth stocks offer. Yet the latter are more cherished.
Why?
Because of their simplicity. Let’s say a stock offers 30% capital appreciation a year like clockwork. You know that whenever you buy, you can expect a set amount of growth a few years later. Relatively wild and unpredictable growth stocks, however, are difficult to time.
The junior stock exchange, though often disregarded for its lack of steady growth stocks and excess of relatively unpredictable stocks, offers a healthy concentration of both types for your RRSP and TFSA portfolios.
A software company
With a market capitalization of $5.2 billion (making it a mid-cap stock), Topicus (TSXV: TOI) hardly fits the bill for a typical venture capital stock. It’s quite sizeable compared to most stocks in the junior exchange, and it offers relatively steady returns. However, we cannot be certain about the “steadiness” of its growth, because it’s not a time-tested stock.
It has only been trading on the venture capital exchange since February of this year and has already grown 110%. One thing that endorses its steady growth potential is its pedigree. Constellation Software, which is undoubtedly one of the most trustworthy growth stocks in Canada, spun out Topicus after it fully acquired this Netherland-based vertical market software provider. And if it follows Constellation’s pattern, Topicus can offer amazing and steady returns.
An Australian mining company
Unlike Topicus, which was a foreign software company bought by a Canadian tech giant, Jervois Global (TSXV:JRV) is purely an Australian company that is cross-traded on the venture capital exchange. It’s a major cobalt miner with operations in multiple countries, including U.S, and Canada.
Cobalt is a useful naturally occurring metal that has a wide variety of applications — the most important of which (from an investment perspective) is its use in Lithium-ion batteries. The wave of electric vehicles is coming, and when it sweeps the market, it will not just give rise to EV producers, but companies associated with the entire production line, including Cobalt miners like Jervois.
The stock has already experienced healthy growth in the last 12 months (100% rise), and it might be packing a lot more growth for the future as well.
An electric bus company
Electric buses are still a relative novelty, and companies like Vancouver-based GreenPower Motor (TSXV: GPV) are still languishing in obscurity, but that might soon change. A few sizeable orders of its EV vehicles can push the company’s financial profile as well as the stock quite high. Few municipalities and city governments (in the U.S. and Canada) have already added GreenPower vehicles to their fleets.
The EV star product line is spearheading the company’s sales, but GreenPower is also trying to enter the U.S. school bus market, which is poised for an EV conversion. It already has a vehicle (ironically called the “BEAST”) to cater to the school transport market. The company is also producing vehicles for the cargo business.
Foolish takeaway
The junior exchange is often considered more volatile compared to TSX, and to an extent, this notion is true. Many venture capital stocks are significantly more volatile and prone to growth bursts and great slumps, which offers a striking contrast to the relatively more predictable and steadier motions of TSX stocks.
Still, many undervalued stocks trading on the junior exchange, especially when bought at the right time, can bring a lot of powerful growth to your portfolio.
