The Nasdaq and the tech stocks have made millionaires over the past decade as software and the cloud changed how we work. You might have read many articles stating a $10,000 investment in Tesla, Microsoft, and Nvidia in the early 2010s made their investors millionaires. These companies achieved a trillion-dollar market cap, and investors became millionaires.
What type of tech stocks are millionaire makers
Although not in the trillion-dollar race, this Canadian tech stock is making investors millionaires on its way to growth. Constellation Software (TSX:CSU) is not a tech stock but an umbrella company whose core business is to acquire vertical-specific software (VSS) companies that are niche, sticky, and enjoy regular cash flows. Constellation uses the power of compounding in a market with little to no competition.
Hence, many of its acquisition deals are all cash with no competing bet. If there is another bidder, it will elevate the price, making the acquisition less attractive to pursue.
Coming to the compounding part, Constellation Software acquires companies for their cash flows and uses it to buy new companies. It is growing its constellation of cash-generating software companies by reinvesting the cash. Now imagine each of these companies growing organically at 2-3%. The larger the scale, the bigger the growth.
For instance, 3% growth on $100 million is $3 million, but on $100 billion, it is $3 billion. And don’t forget that new companies that keep getting added. There will come a point where the 3% organic growth will overtake the acquisition-driven growth. That is how Constellation Software continues to grow its stock price.
Let’s understand it from the investor’s point of view.
This tech stock has created millionaires
Those who harnessed the power of compounding early and continued to invest in CSU stock have created wealth. Suppose you started with a $20,000 investment in Constellation Software and gradually reduced it by $5,000 every time the stock price doubled. If you invested this amount on the first day of January, here is how your share count would have grown in 10 years.
| Date | Constellation Software’s Stock Price | Invested Amount | Number of Shares Purchased |
| Jan-14 | $225.00 | $20,000.00 | 89 |
| Jan-15 | $345.44 | $20,000.00 | 87 |
| Jan-16 | $569.32 | $20,000.00 | 35 |
| Jan-17 | $616.28 | $15,000.00 | 24 |
| Jan-18 | $763.70 | $15,000.00 | 19 |
| Jan-19 | $864.92 | $15,000.00 | 17 |
| Jan-20 | $1,268.29 | $15,000.00 | 12 |
| Jan-21 | $1,669.99 | $10,000.00 | 6 |
| Jan-22 | $2,350.01 | $10,000.00 | 4 |
| Jan-23 | $2,148.17 | $10,000.00 | 4 |
| Total Investment | $150,000.00 | 297 |
As you can see from the table above, the number of shares purchased is declining faster than your invested amount because the stock price is growing faster. After 10 years, you stop investing and let your investments grow. Your total investment of $150,000 would have bought you 297 shares of Constellation Software. These shares are now worth $1.32 million, with shares trading above $4,400 per share.
Can this tech stock make more millionaires?
Constellation Software’s returns depend on the stock price growth, and this growth depends on the acquisitions it makes. Although the business is of acquisition, the stock price of Constellation Software goes through the bulls and bears of tech stocks. I looked at the last 10 years of annual growth in the stock price.
| Date | CSU stock price | YoY Growth |
| Jan-14 | $225.00 | |
| Jan-15 | $345.44 | 54% |
| Jan-16 | $569.32 | 65% |
| Jan-17 | $616.28 | 8% |
| Jan-18 | $763.70 | 24% |
| Jan-19 | $864.92 | 13% |
| Jan-20 | $1,268.29 | 47% |
| Jan-21 | $1,669.99 | 32% |
| Jan-22 | $2,350.01 | 41% |
| Jan-23 | $2,148.17 | -9% |
| Jan-24 | $3,283.86 | 53% |
| 2024 Till Date | $4,471.67 | 36% |
You can see that the stock surged significantly above 50% in 2015 and 2016, a pivotal time for tech stocks. The next big rally was during the tech bubble of 2020-2021, followed by a 9% dip during the 2022 tech stock meltdown. However, tech stocks picked up momentum again in 2023, and the stock has returned to its strong double-digit rally of over 50%.
The stock is still growing significantly even after crossing a $4,400 price point.
Investor takeaway
Constellation Software’s high stock price is because the company never split its shares. Even if you buy the stock above $4,400, you can make a $2,200 capital gain on a 50% return.
