After a hot start to the year, the Canadian stock market has cooled over the past month. The S&P/TSX Composite Index jumped more than 5% in January but has been trading mostly sideways throughout February. Even with the strong start to 2023, though, the index is still down close to 10% from all-time highs set in early 2022.
There’s enough historical data to suggest that the Canadian stock market will eventually rebound and return to all-time highs. When that will happen, though, is anybody’s guess. So, rather than hopelessly trying to time the market perfectly, I’d rather spend my time searching for quality stocks to invest in that I’d feel confident about holding for the long term.
I’ve put together a list of three growth stocks at the top of my watch list right now. If the market begins to trend downward in March, long-term investors would be wise to think about loading up on one of these three companies.
goeasy
Of the three companies on this list, goeasy (TSX: GSY) is, by far, the growth stock trading at the largest discount. Shares are down close to 50% from late 2021.
With shares up nearly 20% on the year, we’re starting to see momentum gather, as goeasy returns to its market-beating ways. While the stock may be trading far below all-time highs right now, shares are still up more than 200% over the past five years. In comparison, the S&P/TSX Composite Index has returned just over 30%.
High interest rates have taken a significant hit on demand for the consumer-facing financial services provider, which explains the recent selloff. But with interest hikes beginning to slow down, now could be an opportunistic time to start a position in this market-beating growth stock.
Constellation Software
Not many TSX stocks rival Constellation Software (TSX: CSU) when it comes to dependable market-beating returns. In addition, the tech company held up impressively well in 2022, while many other growth stocks in the tech sector saw share prices plummet.
With the stock up 10% on the year, Constellation Software is trading just shy of 52-week highs. It may not seem like an opportunistic time to invest, with the tech stock not exactly trading at a discounted price, but this is not a growth stock that goes on sale often.
If you’re looking for a dependable growth stock that you can add to regardless of the condition of the economy, Constellation Software is the company for you.
Descartes Systems
Last on my list is another tech stock trading not far from all-time highs.
At a market cap of $8 billion, Descartes Systems (TSX: DSG) is a much smaller company than Constellation Software. I’d argue, however, that it has more long-term growth potential, partially due to its smaller size.
As a software provider in the supply chain space, Descartes Systems unsurprisingly often flies under the radar. But with the returns that the growth stock has recently delivered, you’d think the tech company would receive more attention.
Shares are nearing a 200% return over the past five years and close to 1,000% over the past decade.
Descartes Systems isn’t in the unprofitable high-growth stage anymore, so those multi-bagger years may be a thing of the past. The company does, however, still have plenty of growth left in the tank. I wouldn’t bet on Descartes Systems to begin trailing the market’s returns anytime soon.
