Tech stocks were a popular choice during the early days of the pandemic. And it was for a variety of reasons. Whether it was their connection to supply-chain demands, e-commerce, or work-from-home needs, tech companies boomed.
However, there are very few tech stocks I would buy today. In fact, I would say there is only one I would pick up on the TSX today. Why? Let’s get into it.
You need a track record
The one thing that most tech stocks seriously lack is a track record. Let’s look at the incredible performance of Shopify. This company ballooned from $35 to $2,228 at its all-time high, thanks to the growth of the e-commerce sector. Yet right now, the shares have collapsed, down to $885 as of writing.
Is Shopify stock a poor investment? I’m definitely not saying that. But I’m also not buying it these days. It’s only been around since 2015, and analysts stated even then that it simply didn’t have the history to demonstrate it can make it through rough times.
And we’re seeing those rough times now. A market crash didn’t get it, but supply-chain issues sure did. Furthermore, with fewer COVID-19 restrictions there’s fear that its growth will shrink further and further. That remains to be seen, but therein lies the point. If Shopify stock could point to its past performance years back, then perhaps it wouldn’t have shrunk so far.
Find tech stocks with experience
If you want to get into tech stocks, then you need to find the ones that can prove they can make it through the hard times. Think of FAANG, for example. But those aren’t on the TSX today. What is? Constellation Software (TSX:CSU).
Constellation has been on the market for well over a decade, and continues to prove its worth time and again. The software company ballooned from its talented management team that knows exactly what to acquire. This allows the company to create a strong balance sheet that’s only getting larger.
Let’s look at the last year as an example. In February, Constellation stock announced its earnings report for the fourth quarter and 2021. Revenue grew 27% in the quarter year over year, and 29% for 2021. The company made $1.52 billion in acquisitions, $487 million of which were in the fourth quarter. And even more acquisitions are on the books for the next quarter, with a total consideration of $150 million.
Is it a deal?
Among tech stocks, the thing with Constellation stock is it’s not much of a deal. Shares trade at $2,157 as of writing. While this may be down from all-time highs, and below its target price of about $2,600, you can’t deny it’s expensive.
But does that mean you shouldn’t pick it up? Absolutely not. Shares of the company increased 230% in the last five years. That’s through a pandemic, a market crash, Russian invasion, supply-chain demands, and more. And in the last decade, shares are up a whopping 2,300%!
So don’t let the high share price scare you. If you can afford it, there simply aren’t other tech stocks on the TSX today that offer the stability and track record of Constellation.
