Tech stocks had an excellent run for a while leading up to 2022. With an inflationary environment and high interest rates weighing down on the economy, the broader market has also seen very tepid growth in the last year. Many experts expect a recession to hit the market soon. However, the stock market is cyclical in nature.
Time and time again, the stock market’s bear run has ended with a strong bull run to boost the economy. While allocating money to risky growth stocks might not seem appealing right now, it warrants giving it a thought. When the bull finally begins to roar, there are several stocks that can bounce back strong.
The tech industry boasts several names with the potential to deliver substantial wealth growth through rapid capital gains in a bull market. Today, we will discuss one such tech stock that you can consider buying up before that happens.
Descartes Systems
Descartes Systems Group (TSX: DSG) is an $8.44 billion market capitalization multinational tech company headquartered in Waterloo. Founded in 1981, Descartes Systems has been through several market downturns, only to come out stronger on the other side. Taking a better look at it can paint a clearer picture of why that has been the case and why it might be a good pick right now.
What the tech stock does
Descartes Systems is a tech company that empowers other companies by optimizing their logistics and supply chain management through tech-based solutions. The core product is Global Logistics Network, a solution that lets its clients in the shipping industry effectively communicate. Over the last 23 years, Descartes has helped companies transport various goods.
With its help, logistics companies have managed to improve everything from route planning and optimization to transport intelligence. With global supply chain issues becoming increasingly prevalent, the demand for Descartes’s solutions has increased in the last few years.
With every crisis in the past, it has seen margins improve. This is where its Software-as-a-Service (SaaS) business model allows the company to benefit greatly, regardless of market cycles.
Foolish takeaway
Its performance during and after the last few global crises reflects on the ability of Descartes stock to bounce back strong. After a 23% decline amid tensions between the U.S. and China in 2018, its share prices soared by 70%.
The 29% decline in its share prices in 2020 was dwarfed by its 140% surge in 20 months. When the conflict between Russia and Ukraine broke out in March 2022, its share prices declined by 20%, only to surge by 40% within a year.
As of this writing, Descartes Systems stock trades for $99.46 per share. Up by 3.94% year to date, it is a rarity among tech stocks, most of which are down by significant margins.
While a recession might result in a downturn in the coming weeks, scooping up its shares at these prices can set you up for substantial wealth growth through capital gains in the next bull market.
