No one likes to spend money. Sure, we like to buy things, have things, and see investments grow. But to actually shell out cash? No one enjoys that process.
Yet, when it comes to picking up an expensive stock, it’s important to consider why it’s expensive in the first place! That’s why today, we’re going to look at the most expensive stock on the TSX and why it remains a stellar buy for investors.
Constellation Software
If you want the highest share price around, head on down to Constellation Software (TSX:CSU). The company has a strong history of growth that goes right back to the 1990s. That’s when the company started its software acquisition business.
Constellation stock has demonstrated a successful strategy of acquiring small- to medium-sized software companies and integrating them into its portfolio. This strategy allows it to diversify its revenue streams and expand its market presence.
The focus, however, is on niche markets — companies within the software industry where it can establish a dominant position. This allows it to maintain pricing power and minimize competition. It’s ingenious, really, but takes a certain skill — one that Chief Executive Officer (CEO) Mark Leonard has long demonstrated.
CEO’s strong execution
Leonard is not only the CEO of CSU stock but also its founder, having founded it back in 1995. Under his leadership, it’s grown to be a global behemoth with a diverse portfolio of software businesses across multiple industries.
Leonard focuses on a long-term vision, finding value over short-term gains. Over the years, he has consistently focused on building sustainable businesses with strong competitive positions and recurring revenue streams. In fact, Leonard is known for his contrarian investment philosophy and willingness to go against conventional wisdom. He has often invested in businesses and industries that others overlook or underestimate.
If unconventional, this strategy certainly has worked. CSU stock is one of the few companies that continued to trade higher and higher with no more than a blip during volatile times, and this remains the case today.
Expensive? Yes. Worth it? Absolutely
CSU stock has become a stable stock with a clear path to scaling out its operations as well as maintaining operational efficiency to improve the profitability of the companies it acquires. These best practices continue to drive growth to this day.
Even during economic downturns, CSU stock has managed to avoid the trap that other tech stocks have fallen into. Even during the 2020 crash, CSU stock kept on climbing. In fact, during the last five years shares have surged, up 203% in that short period of time.
And yet, it might look expensive, trading at 101 times earnings. That’s certainly higher than its average of 77.85 over the last five years. Yet it’s lower than the maximum at 128.13, providing some wiggle room. So sure, shares have soared higher, up 38% in the last year. But honestly, it’s one of the few companies out there that will likely achieve this again and again, making it an expensive stock every investor should consider.
