You’ve probably heard a lot about the so-called “Magnificent Seven” stocks in recent years. In fact, you’re likely to hear one of the names in the cohort being talked about ad nauseam by the folks on television. They’ve been powering big market gains in the U.S.
Whether it’s their massive network effects or their impressive generative artificial intelligence (AI) plans, it’s hard to beat the market if you’re not in the names. Indeed, the main reason why the S&P 500 and Nasdaq 100 indices have left the TSX Index behind this year has been the Magnificent Seven members. Indeed, these massive (and in many cases multi-trillion-dollar) mega-cap technology firms can only be found in America.
The Magnificent Seven are truly wonderful. But Canada also has magnificent names of its own!
Though Canadians can easily obtain exposure by swapping their loonies for greenbacks to buy the individual names or purchasing a low-cost S&P 500 index fund, I think the degree of “overconcentration risk” is notable. Indeed, what happens when the biggest and most powerful tech companies on Earth surge by double-digit percentage points over a short timespan?
They put on the market cap that much easier. And as they continue to add trillions in value, the market stands to be that much more concentrated in the Magnificent Seven companies. Whether that’s an ominous or bullish sign is up for debate.
Regardless, I think investors should appreciate the magnificence of the names. Here in Canada, we don’t have such magnificent tech companies that can pack such a punch. That said, there are names that are magnificent in their own right. And this piece will tune into three I’d like to refer to as Canada’s “Magnificent Two.”
Constellation Software
Constellation Software (TSX:CSU) is one of the most magnificent tech companies in the country. At writing, shares trade at more than $4,100 per share after surging more than 230% in the past five years. Indeed, the stock’s chart is a thing of beauty. An upward long-term slope with not too much choppiness. It’s not just the TSX-beating gains that are impressive about the software firm; it’s the low beta (0.8 at writing), which entails less market risk than most other tech firms.
It will be interesting to see how the $87 billion firm seeks to invest in the AI age. My bet is that CSU stock will continue outpacing industry rivals and the rest of the market as management looks to unearth and invest in some of the country’s most innovative software firms.
Dollarama
Dollarama (TSX:DOL) is another magnificent play that’s close to all-time highs right now. The stock went parabolic this year amid Canadian consumers’ rush to high-value discount retailers. With an expansion plan underway and some of the best bargains in the Canadian retailing scene, there should be no mystery as to why DOL stock is the ultimate growth play for all seasons.
Shares aren’t cheap at 35.26 times trailing price to earnings (P/E), but compared to lacklustre dollar-store rivals trading in the U.S., which aren’t nearly as growthy or well-run, I’d be more than willing to stick with Dollarama. It’s a far better dollar store chain than the ones trading in the U.S. market.
In fact, Dollarama may be the best dollar store stock in the world as it embarks on its long-term expansion plan while continuing to put customers first.
