According to market analysts, bond rates are on the verge of a downtrend again, with benchmark interest rates expected to decline. This is true in both the Canadian, U.S., and most developed economies. Accordingly, for investors who believe that these lower rates will bleed into even higher stock market multiples, looking at the best-performing growth stocks of 2023 could provide some insights as to where to invest moving forward.
In a sense, the market does appear to be slightly overvalued right now. Maybe that’s sugarcoating it when one looks at historical multiples compared to where stocks are broadly trading today.
However, there is some additional value to be found in somewhat overlooked TSX-traded growth stocks right now. In my view, these three companies could be screaming buys if another hyper-bull market materializes, like what we saw take place following the pandemic.
Let’s dive in!
Constellation Software
Constellation Software (TSX:CSU) provides enterprise software services and solutions for different types of businesses. It offers specialized solutions that are crucial for enhancing cost efficiency, productivity, customer satisfaction, and sales. The company has a diverse clientele across multiple industries, including mining, communications, bioscience, finance, education, retail, healthcare, real estate, and more.
Constellation’s status as a software service provider catering to both public and private companies around the world benefits investors looking to gain global exposure to the tech sector. While headquartered in Canada, the company has a strong presence in Europe, Asia, the Americas, and Africa.
The software sector is one that’s generally perceived as being higher margin and higher growth. Constellation’s long-term stock chart speaks to just how powerful these trends have been. Assuming we don’t see a slowdown in software spending in the coming years, Constellation’s growth-by-acquisition model should continue to propel strong financials, spurring a higher stock price over time. At least, that’s how it’s worked for a very long time. I don’t expect things to change, particularly if we see a continuation of this very impressive rally over the past year.
Brookfield Renewable
Brookfield Renewable (TSX:BEP.UN) stands as one of the top publicly traded companies in the global renewable power sector. It is mainly engaged in the business of power generation through multiple renewable sources.
Moreover, Brookfield Renewable operates, invests in, and owns a swath of solar facilities, hydroelectric installations, and wind power generation facilities across Asia, South America, North America, and Europe. It is also involved in providing power storage and distribution services.
Thus, for those looking to gain exposure to the renewable energy space via hard assets, this is the vehicle to do so. The company has remained under the radar to some extent, providing impressive returns during the last bull market rally. Accordingly, with the stock consolidating around the $30 level, a return to previous highs could provide a double-up for patient investors betting on a continued rally in growth stocks.
Brookfield Renewables’s recent green bond issuance of $400 million suggests more growth is on the horizon. These bonds will provide the company with the capital needed to take on new projects and invest in existing operations. For those bullish on the company’s long-term trajectory and that of the renewable energy industry as a whole, this is a top stock to consider right now.
Shopify
Shopify (TSX:SHOP) stands out as a leading cloud-based e-commerce platform catering to small- and medium-sized enterprises. Like the other companies on this list, Shopify is headquartered in Canada but receives the vast majority of its revenues internationally, mainly from the U.S.
Shopify offers merchants various types of facilities, some of which include web-based sales channel management and mobile storefront integration with social media, marketplaces, or even pop-up shops. The stock encountered certain ups and downs, like a dip in 2022 and also a notable surge of 111% in 2023.
For those betting on a continued rally in 2024, I think Shopify is the obvious TSX growth stock pick to consider. The company’s recent partnerships and strategic growth plans suggest Shopify’s past growth rates may underestimate its future prospects. The focus for investors in SHOP stock will remain on profitability, so I’d keep a close eye on this name over the coming quarters. But if Shopify is able to continuously beat expectations as it generally has in the past, this is a stock that has plenty of room to fly higher in 2024.
