It’s been a struggle for the Canadian stock market to return to all-time highs. The S&P/TSX Composite Index continues to trade below where it was in early 2022.
After a rough performance in the second half of last year, the broader Canadian stock market is positive year to date. There have been several bull runs this year to excite investors, but the market seems unable to break through to new all-time highs.
The market as a whole may be having difficulty rebounding after last year’s performance, but many individual TSX stocks have been on fire through the first seven months of 2023.
Many of those stocks still have a ways to go to return to 2022 price levels, meaning now could be an opportunistic time for long-term investors to be loading up.
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Owning individual stocks in a TFSA
When it comes to long-term investing, the Tax-Free Savings Account (TFSA) isn’t always the first account that comes to mind. However, the TFSA can serve as an excellent long-term wealth generator — that is, assuming, the investments held within the TFSA have growth potential.
While stocks do provide long-term growth potential, volatility also tends to be far higher than some other types of funds, such as cash, bonds, or mutual funds. But as long as you’re willing to remain patient and focus on diversification, owning individual stocks could drive monster returns in a tax-free account.
With that in mind, here are two high-growth tech stocks that are primed for many more years of market-beating returns.
Stock #1: Shopify
It wasn’t long ago that Shopify (TSX:SHOP) was not only the largest tech company in Canada but the largest on the TSX. However, after shares dropped more than 75% last year, the tech stock has long since given up that number-one position.
Alongside many other growth stocks, shares of Shopify have surged this year. The stock is nearing a 75% gain on the year. Still, shares are trading more than 50% below all-time highs.
Huge amounts of growth were pulled forward early on in the pandemic, which led to massive short-term gains for Shopify. Unsurprisingly, the sudden surge was followed by a significant pullback the following year.
Now, after the stock price seems to have balanced out, long-term investors may want to consider loading up. At this rate, it won’t be long before Shopify is back to all-time highs.
Stock #2: Constellation Software
If Shopify carries too much risk and volatility for your liking, but you’re still looking to earn market-beating returns, Constellation Software (TSX:CSU) could be a great compromise.
Even as the business matures and revenue growth slows, the stock continues to largely outperform the market. Shares are up close to 200% over the past five years. In comparison, the broader Canadian stock market has returned less than 30%, excluding dividends.
Contrary to many other tech stocks, Constellation Software is actually trading just shy of all-time highs today. So, if you’re looking for a bargain, this might not be the pick for you.
That being said, Constellation Software is not a stock that goes on sale often. And if you’re looking to own a company with a market-beating track record like this one, you’ll need to pay up.
