There’s a New Hot-Shot Tech Stock: Should You Buy?

Recently listed stocks with insufficient performance history to back up their potential can be risky. But this risk may come with a proportional reward.

| More on:
Shopping and e-commerce

Image source: Getty Images

Buying a company fresh on the TSX can be tricky. You can get lucky in the short term, enjoy an early optimism boost, and cash out before the stock stabilizes. You can also make a good long-term bet with a consistent growth stock that you can keep holding for decades. But it’s just as easy to get unlucky with a newcomer and buy something that may not produce good results in the short or long term.

So where does Lumine Group (TSXV:LMN) fit?

The company

Lumine Group is a newcomer to the venture capital market and among the tech stocks in Canada. It’s an acquisition-oriented company that acquires tech companies related to communication and media industries and made its first acquisition in 2014. It has relatively flexible market criteria and looks for vertical market/niche leaders with a diverse customer base.

The current portfolio consists of about 25 companies, 14 of which have been acquired since the beginning of 2020. The portfolio is quite diverse when it comes to geography and focuses on the acquired companies. This includes service orchestration software companies, transaction solutions, subscription services, a smart metering company, etc.

Even within the confines of two industries and focusing on mostly B2B businesses, Lumine Group has developed a portfolio that caters to a broad spectrum of entities, adding to its resilience. The Lumine ecosystem spans over 30 countries and over a thousand individual customers (businesses).

The company prides itself in leveraging best practices (over 250 of them) to govern the relationship with the acquired companies to best empower them without compromising their autonomy.

The stock

Lumine Group stock only started trading on the venture capital market in March 2023 and, so far, has risen only by about 8.5%. This is far slower than the tech sector’s compelling performance, which is enjoying a decent bull market phase right now over the same period that has pushed it up by over 17%. However, it’s too early to start comparing it to the rest of the sector.

One of the most promising things about this stock and its future prospects is its resemblance to Constellation Software, although with a relatively limited scope. It also looks for vertical market leaders, and despite its relatively smaller scale, it already has an impressive international presence.

If there is a reasonable probability that its long-term growth might mimic that of Constellation, that’s a compelling enough reason to consider buying this stock.

Foolish takeaway

Both the telecom and media industries are going through a major flux right now. The telecom industry is still struggling with worldwide 5G penetration and is getting ready for technologies like IoT to become more mainstream.

The media industry is living through the early days of a streaming service panic. In other words, it’s a good time to test the resilience of Lumine Group’s business model, which may help you predict its worth as a long-term holding.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

More on Tech Stocks

Lady holding mobile phone and shopping bags
Tech Stocks

The Ultimate Growth Stock to Buy With $1,000 Right Now 

Here's why Shopify (TSX:SHOP) could be the ultimate growth stock long-term investors want to consider at this current point in…

Read more »

Hands shaking over a business deal
Tech Stocks

Meet the Growth Stock I Can’t Stop Buying This Year

Topicus stock (TSXV:TOI) has been a top growth stock this year, with strong finances, a stable acquisition strategy, and more…

Read more »

grow dividends
Tech Stocks

Celestica Stock Is up 44% Since Earnings: What Investors Need to Know

Celestica continues to benefit from strong demand and production efficiencies, yet the stock remains undervalued.

Read more »

healthcare pharma
Tech Stocks

What’s Going on With WELL Health Stock?

WELL stock (TSX:WELL) made strong moves once again, with record earnings and even higher guidance for 2024.

Read more »

A shopper makes purchases from an online store.
Tech Stocks

3 Reasons to Buy Shopify Stock Right Now

Based on these three top reasons, Shopify (TSX:SHOP) stock appears undervalued to buy right now.

Read more »

stock research, analyze data
Tech Stocks

What’s Going on With Lightspeed Stock?

Lightspeed (TSX:LSPD) stock has been climbing once more but is still far from its three-digit share price. So, is it…

Read more »

Target. Stand out from the crowd
Tech Stocks

Missed Out on Nvidia Stock (Again)? Buy Descartes Instead

Nvidia (NASDAQ:NVDA) stock soared yet again after earnings, passing the four-digit mark. But with shares so high, maybe this option…

Read more »

Group of people network together with connected devices
Tech Stocks

This Is the Best Overlooked AI Stock on the TSX Today

This AI stock has been a top growing in the last while, but remains overlooked despite its strong portfolio and…

Read more »