Forget TD Stock: 2 Tech Stocks to Buy Instead

Inject some solid growth potential into your self-directed investment portfolio by allocating some capital to these two TSX tech stocks today.

| More on:
Make a choice, path to success, sign

Image source: Getty Images

If there is one thing that will never change for Canadian stock market investors, it is the reliability of Canadian bank stocks. The likes of Toronto-Dominion Bank (TSX:TD) stocks will always remain investor favourites because the banking sector rarely disappoints. That is why they remain consistently at the top of watchlists and are staple holdings for long-term investors.

Canada has a particularly safe banking system, and stocks like TD Bank have always shown to be resilient. In addition to their resilience, they have shown incredible long-term stability, excellent dividend-paying streaks, and substantial long-term capital gains. As you start a new year of stock market investing, it is an excellent time to rebalance your portfolio.

While having reliable and resilient bank stocks will always make a strong case, consider balancing it out by allocating some room in your portfolio to growth stocks. To this end, here are two top Canadian tech stocks you can consider instead.

Shopify

Shopify (TSX:SHOP) is a tech stock that needs little introduction to growth-focused investors. The global e-commerce giant burst onto the scene and rapidly became one of the highest-flying tech stocks the TSX has seen.

After its rapid rise, Shopify stock, along with most other tech stocks, fell out of favour with investors. That was a long time ago, and since then, the company’s management has steadied the ship.

Right now, Shopify has cemented itself as a massive player in the global e-commerce market. Its cloud-based e-commerce platform provides solutions to over an estimated million merchants of all sizes worldwide.

After a tough 2022, Shopify stock regained momentum in 2023, seeing its share prices climb by 111%. As of this writing, it trades for $98.89 per share. As the global e-commerce market grows, Shopify stock has every potential to return to, and even exceed, its all-time highs.

Constellation Software

Constellation Software (TSX:CSU) is not a typical high-growth, high-risk tech stock like Shopify. Instead, it is a tech stock that has been a millionaire maker for its very long-term investors. As of this writing, it trades for $3,251.16 per share.

For new investors, such a high price tag might seem scary, especially considering that it has a price-to-earnings (P/E) ratio of 96.79, indicating that it is expensive. However, it is important to understand that the P/E ratio indicates that it is priced as a growth stock, with investors believing it has the potential to grow further.

In the last decade, CSU stock has increased its adjusted earnings per share by around 24% annually. Unlike many other tech stocks, Constellations Software enjoys much of its growth through mergers and acquisitions (M&A).

Its M&A strategy to invest in shares of high-growth-potential tech companies and lending its experience and capital to fuel their growth has been immensely successful. With potentially more M&A activities to come in 2024, it can deliver outsized gains in the coming months.

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Constellation Software Inc. made the list!

Foolish takeaway

As amazing as Canadian bank stocks are, they have their fair share of challenges to contend with. In its latest quarterly earnings report from November 2023, TD Bank stock set aside $878 million in provisions for loan losses, an uptick of 42% from the same period in the previous year.

It also announced a plan to cut its full-time workforce by around 3%. Combined with potential rate cuts, these moves can generate more profits for the bank stock.

That said, Shopify stock and Constellations Software stock have factors favouring potentially greater near-term capital gains. As you rebalance your portfolio for another year of stock market investing, consider keeping these two growth stocks on your radar before they take off.

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 has positions in and recommends Shopify. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

More on Investing

retirees and finances
Tech Stocks

Should You Wait Till 70 To Claim CPP Benefits?

You can earn the maximum CPP payout if you wait till 70 to claim the benefit. But is the wait…

Read more »

Path to retirement
Investing

2 Growth Stocks to Buy and Hold Forever

Buy and hold solid growth stocks that are worth keeping for long haul wealth creation. Here are a couple of…

Read more »

close-up photo of investor Warren Buffett
Investing

2 Best Warren Buffett Stocks to Buy for the Long Haul

If you want to learn to invest like Warren Buffett, these two top Canadian stocks are some of the best…

Read more »

Volatile market, stock volatility
Dividend Stocks

2 Low-Cost Dividend Stocks to Buy at a Discount

Enbridge (TSX:ENB) stock and another dividend play that shows you don't need to break the bank to score a top…

Read more »

exchange traded funds
Investing

Could Investing $20,000 in ZSP Make You a Millionaire?

Here's why buying and holding an S&P 500 index ETF like ZSP could make you a millionaire.

Read more »

financial freedom sign
Tech Stocks

1 Tech Stock Has Created Millionaires and Will Continue to Make More

Are you interested in a tech stock that has created millionaires? Find out which stock that is!

Read more »

rail train
Stocks for Beginners

This Homegrown Railroad Is a No-Brainer Value Stock

CNR (TSX:CNR) stock continues to be the best of the best in terms of the future performance in railway, with…

Read more »

Business man on stock market financial trade indicator background.
Tech Stocks

This Growth Stock Is Down 26%: Buy, Sell, or Hold?

While many growth stocks took to the sky after the December 2023 earnings, this one growth stock fell 26%. Should…

Read more »