It’s impossible to predict how the market will be in the next year, let alone the next decade. Yet, we must make long-term investment decisions based on past performance and analysis to build our portfolio and retirement nest egg over time.
While tech stocks are considered too dynamic and unpredictable for long-term holding by many investors, there are plenty of companies in the tech sector that you can hold in your portfolio for at least a decade.
A logistics software company
If we look at stocks that performed exceptionally well in the last decade to predict the performance of the next decade, Descartes Systems Group (TSX:DSG) is one of the most prominent choices. This company offers solutions specific to logistics and supply chains. It has connected one of the world’s largest logistics networks to its platform, giving the users of the platform massive reach.
DSG stock has risen by about 1,000% in the last decade and if it can repeat this feat in the next decade, you may turn your $50,000 investment in this company into a massive half-a-million-dollar nest egg.
The stock also proved its resilience in the last couple of years when the rest of the tech sector went through a cycle of spiking and brutal correction. Descartes is one of the few stocks that are close to making a complete recovery from the last sector-wide correction.
A company with AI-powered solutions
Artificial Intelligence (AI) may transform the corporate world just as aggressively as the internet did in the last two decades. One of Canada’s most prominent companies working on AI solutions is OpenText (TSX:OTEX). Information Management is the core of its products, services, and solutions. The OpenText Cloud allows a wide array of companies to leverage the full power of the information they have.
The company also possesses an impressive client portfolio, including names like Hyatt and AMD. As a stock, OpenText has been a decent grower and risen by about 268% in the last decade. It’s also one of the few dividend payers in the tech sector, which adds another dimension to its return potential.
Thanks to the 24% discount that is rapidly waning, the stock comes with a 2.5% yield, though it’s shrinking fast.
A software services company
One of the most consistently outstanding stocks on the TSX is Constellation Software (TSX:CSU). The stock is a growth powerhouse and has risen by about 1,880% in the last 10 years alone. Since it also pays dividends, the overall returns have been over 2,300%, one of the highest on the TSX. If it manages to repeat history, you may turn $50,000 in capital into a million dollars in just one decade.
Constellation focuses on acquiring vertical market software developers and solution companies catering to specific industries. It has about six companies in its portfolio right now that cater to dozens of different industries and have a presence in over a hundred countries around the globe.
An IT service company
Tech companies reliant upon a single technology or a specific set of technologies may be vulnerable to breakthroughs in the market (unless they adapt) but service companies like CGI (TSX:GIB.A) can navigate this dynamic landscape with relative ease. The company helps a wide variety of businesses with its IT needs and provides a diverse range of services.
The stock, apart from some major fluctuation in the last two-to-three years, has shown amazing growth between 2009 and 2020, almost 1,000%. If it continues growing at this pace, it may help you grow your savings/capital to a decent size in the next decade. The stock has already recovered from its last correction and is in its bull market phase.
A vertical market software company
Topicus (TSXV:TOI) has been a publicly traded company for less than three years, so there is not enough data in the past to predict its performance for the next decade. However, it’s a mature company serving a conservative European market. The fact that it’s partly owned by Constellation Software also gives it a strong pedigree.
The stock has already shown its growth potential when the circumstances are right. It grew by about 115% from inception to its first peak, then cratered, following the rest of the sector on a downward path. It has already started its recovery journey, again with the rest of the sector, and this may be the beginning of its long-term growth phase.
The five tech stocks are among the best long-term bets the sector has to offer, and if they perform the same way they did in the last decade, you might give your portfolio a significant boost in the next 10 years by investing in them.