The stock markets are running hot into May after an April cool-off. For Canadian investors, recent TSX market momentum may be worth getting behind for Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) investors with a bit of extra cash sitting in savings. As some big names in the investing world begin to sell in May and go away, at least until better bargains are available (Warren Buffett made a notable sell in his firm’s top holding recently), it may feel a bit uneasy to chase the recent surge in momentum.
Of course, valuations aren’t incredible, especially in the U.S. tech scene, with all the buzz and hype surrounding generative artificial intelligence (AI). The good news is you don’t have to place a bet on the hottest AI stock pick of the day or week. Instead, you can take a bit of profit off your tech winners and park it in some of the dividend bargains, which the TSX Index seems to be full of right now.
Whether Warren Buffett will make a big investment in a Canadian company in the near future remains to be seen. Regardless, one has to think it’s worthwhile for U.S. value investors to check out the securities north of the border.
As a bonus for Americans, the exchange rate seems to be heavily in favour of the U.S. greenback, making the USD-to-CAD swap more than worthwhile while the loonie goes for less than US$0.73. Should the Bank of Canada begin to cut rates at some point in the coming months, perhaps US$0.70 could be the next stop for the Canadian dollar.
Without further ado, here is one innovative (but often overlooked) TSX tech stock that offers growth and value together.
Descartes Systems Group
Descartes Systems Group (TSX: DSG) is a fairly small tech company with its $11.4 billion market cap. That said, it’s a well-run, innovative firm that’s worth keeping on your radar.
Recently, the software company has been on an acquisition spree, buying up Aerospace Software Developments in a deal worth around $83 million. That’s a fairly bite-sized deal but one that it’s quite intriguing. As the name of the firm suggests, it’s in the business of creating software for customs declaration. It’s an intriguing niche, to say the least.
More than a month ago, Descartes bought OCR Services, a Maryland-based firm, in a deal worth around $90 million. Indeed, such deals have been pretty good news for investors, given the firm’s knack for extracting deals from small-scale acquisitions in various corners of the small-cap tech scene. After surging 147% in the past five years, shares of DSG are definitely a TSX crusher worthy of more attention!
With a 72.9 times trailing price-to-earnings (P/E) multiple, DSG stock looks expensive, but I think its growth profile more than makes up for the seemingly high price. With the stock at a new all-time high of around $134 per share, I’d not be afraid to nibble into a position starting this May. It’s an underrated tech company that I find compelling while it’s going for under 15 times price to sales.
