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 (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 (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.
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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.