With broader stock markets surging higher, causing some market strategists to hike their price targets for the S&P 500, it seems like now is a great time to get started investing. Indeed, stocks only seem to go up these days, that is, unless you’re in a few of the mega-cap tech plays that are struggling to catch up with the artificial intelligence (AI) race.
Though there may be chatter of bubbles and an imminent market correction, I’d argue that a beginner investor doesn’t have to jump into the hottest plays that are leading these markets higher. In fact, there are many great value options in Canada, many of which, I believe, have been overlooked in favour of some of the hot tech titans south of the border.
New investors: Getting started in the face of a roaring bull market
Indeed, the Canadian market may be slightly lacking in those next-generation AI plays. The good news is you don’t need to chase the hot plays to do relatively well in markets. Though many new investors may be drawn in by momentum stocks, I’d argue that it’s the simple, easy-to-value (but, more importantly, easy to understand) companies that are worth your investment dollars.
And if you can’t understand a business under question or evaluate it, don’t feel obliged to buy shares of a firm anyway. You see, as a self-guided DIY investor, you don’t need to answer to anyone. You can focus on building wealth over the course of many years and can afford to hit the odd stumble without having to make drastic, oftentimes emotional moves in the heat of a panic or frenzy.
As the AI frenzy continues, I’d much rather look to some of the less-loved, perhaps lower-tech plays for the long haul. And in this piece, we’ll check out one that would make a fine candidate for a new investor’s first-ever stock purchase! Without further ado, let’s consider the following Canadian stocks while it’s hovering at new highs.
Constellation Software
Constellation Software (TSX:CSU) is one of Canada’s best large-cap tech companies — the firm has a more than $80 billion market cap today — with its incredible 234% in gains over the past five years. Despite the magnificent rally (it deserves to be in a Canadian version of the Magnificent Seven, in my opinion!), the stock doesn’t seem pried for perfection, at least not quite yet.
At 36.7 times trailing price to earnings (P/E), Constellation isn’t a “steal of a value,” either. However, I believe that far too many new investors may mistake the software top dog as overvalued. Yes, it’s a high-priced stock, with shares going for almost $3,800 per share!
That said, if you were going to put a few thousand to work anyway, I’d argue that the high share price is less meaningful. It is no representation of the value to be had. It’s merely a high bar for smaller retail investors who may not have enough to buy one share.
Only time will tell if a stock split will lower this bar. Personally, I think a split is needed sooner rather than later! In any case, I view CSU stock as an innovative tech firm worth the price of admission. As far as I’m concerned, it’s a cheap way to expose yourself to the high-growth areas of small-cap Canadian software.
