Tech stocks across the border are a completely different breed compared to tech stocks in Canada. The U.S. is home to the so-called “Magnificent Seven,” which includes the newcomer semiconductor giant Nvidia. Once a company that made graphics chips for gaming, Nvidia started gaining a lot of investor attention when crypto miners started using its graphics cards heavily.
Now, the company is riding the artificial intelligence (AI) train. The hardware it creates, i.e., graphics cards/graphics processing units (GPU), is critical for training large AI models, and this has made Nvidia one of the most valuable companies in the world.
There are no such superstars in the Canadian tech sector, but when it comes to growth, Canadian tech stocks like Constellation Software (TSX:CSU) are in a league of their own.
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Explosive vs. consistent growth
Constellation Software is a stock to consider in almost any year, and 2024 is no exception. The stock has risen over 1,390% in the last 10 years. The growth slowed down in recent years but over 220% growth in five years is still quite significant. At that pace, investors can get four-fold returns on their investment in less than a decade. The numbers become more impressive when we add the dividends to the equation.
The growth in the last five years is a fraction of Nvidia’s 2,500%. However, practically most of Nvidia’s growth happened in the last five years, when it rose from a single-digit price tag to a low three-digit one. It used to be a penny stock before 2016, trading below US$1 per share.
Constellation, however, has been going up for two consecutive decades. This consistent growth and resilience against harsh markets is why it’s a super tech stock for a lot of investors.
The company
One of the things that makes Constellation quite safe is its business model. It is an acquisition-oriented business, and Constellation currently has a portfolio of six companies that, in turn, control a number of smaller companies, targeting a variety of vertical markets. Each of the six companies caters to anywhere between six and over a dozen public and private sectors/industries.
The geographical spread of its business is just as impressive. One of its subsidiaries, which it has spun out into its own publicly traded company, mostly operates in the European market. Another has a presence in a hundred countries.
Foolish takeaway
Constellation is a solid pick, not just for its performance history, consistency, or business model, but also for its ownership structure. Insiders own about 6.6% of the company and institutions own roughly 41.6%. The rest is owned by the public. This indicates management’s strong belief in the company’s future and a large institutional ownership leads to higher stability, allowing it to weather bear markets better.
