Pace and consistency are two traits you might look for in a stock’s growth potential if you are planning on holding it for a decade or so. When holding a stock long term, you want to be reasonably sure that the stock will keep moving in the desirable direction, even if there are a few bumps along the road. That’s the consistency part.
But if you hold two equally consistent stocks for the same period — a decade — the faster grower will likely offer better returns (excluding the dividends-based returns).
And if you are looking for stocks that offer you a solid combination of pace and consistency, there are two that you should look into.
A railway stock
Canadian Pacific Railway (TSX:CP)(NYSE:CP) is one of Canada’s two largest railway companies and is ready to go through one of the largest railway mergers in the world. The merger is currently paused (waiting for a federal hearing) and might be in danger of derailment. But if it goes through, the Canadian Pacific Railway network will connect three countries: Canada, the U.S., and Mexico.
The resulting Canadian Pacific would be significantly more powerful. It will benefit from the refined oil exports to Mexico.
The current uncertainty regarding the merger hasn’t been able to hold the stock back from growing with the rest of the market, and it has gained 18% since mid-June. But it’s the long-term growth potential of the stock that you should be interested in if you are going to hold it for the next decade.
The stock has seen its price appreciate 500% in the last decade. If it can give a repeat performance in the next decade, you will see considerable growth in your portfolio, assuming you’ve allocated Canadian Pacific a significant potion in it.
A tech stock
The tech sector in Canada has a history of outperforming the broad market in the long term, but tech stocks also come with a greater level of volatility. But Constellation Software (TSX:CSU), one of the top stocks in the tech sector and the TSX, has been an incredibly consistent grower. Its beta of 0.83 also reflects the stability it offers.
And it’s not just coveted because of its consistent performance. It’s one of the best time-tested growth stocks on TSX, thanks to its consistency and pace. It has seen price growth of over 2,200% in the last 10 years. And if the stock performs even half as well in the next decade, it will still outpace Canadian Pacific Railway stock by being twice as fast.
Constellation acquires, builds, and manages software companies that cater to specific vertical markets and industries. Its current portfolio comprises six operating groups, each with an impressive geographic reach. Collectively, the six groups serve about 100 different markets around the globe.
The two companies can offer robust growth in your portfolio in the next decade if they keep growing at their current pace.
They have distinct competitive advantages that have influenced their growth and the performance of their stocks so far, and these advantages might stay relevant or grow over the next decade. Examples would be the Canadian Pacific merger and Constellation adding another compelling operating group to its portfolio.