Best Tech Sector Stocks for Canadian Investors in the New Year

Canadian tech stocks are pricey today, but here are three stocks to buy if there is a market correction in 2025.

| More on:
Person holding a smartphone with a stock chart on screen

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

While there are not as many as in the United States, Canada has several high-quality tech stocks. In fact, several have become global leaders.

Yet, Canadian tech stocks often trade off the radar of global investors. Periodically, this disconnect is translated in the market and you can get Canadian tech stocks at attractive valuations.

Certainly, today the market is not cheap, and neither are tech stocks. However, if there is a substantial stock market pullback in 2025, here are three Canadian tech stocks I would be buying.

A tech stock with a multitude of software companies

Constellation Software (TSX:CSU) has to be at the top of the Canadian tech sector wish list. The company has delivered strong performance. Its stock is up 38% in 2024, 245% in the past five years, and 24,297% since its initial public offering (IPO) in 2006!

Created with Highcharts 11.4.3Constellation Software PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Constellation owns and acquires mission-critical, niche market software. This software tends to be economically resilient and cash-generative. Constellation yields the cash and buys more companies.

The software firm has a highly invested management team and strong shareholder focus. It has never issued equity since its IPO. Constellation still has a large market to consolidate.

Returns could temper in the years ahead, but they are still likely to be very good. After a good run, CSU stock is not a bargain price. It trades for 29 times free cash flow. However, it will be a good buy if there is any material 10–15% pullback in the market in 2025.

A high-quality Canadian stock

Descartes Systems (TSX:DSG) is another high quality tech stock I would be actively buying in a 15–20% market pullback. Its stock is up 51% in 2024, 190% in the past five years, and 11,995% in the past 20 years.

Created with Highcharts 11.4.3Descartes Systems Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Like Visa is for consumer payments, Descartes provides a similar global network for the logistics and transport sector. Once adopted, its trade network becomes essential to its customers.

Descartes has an array of software services that complement its network. These help logistics companies save time, money, and effort and become crucial to efficiently managing their businesses.

Descartes is another successful serial acquirer. With a cash rich balance sheet, it continues to have a good runway to deploy capital into attractive opportunities.

Much of this optimism is amply reflected in the stock price today. It trades for 36 times free cash flow. That is at the high end of its valuation range. At some point, this stock will pull back, and that would be a great time to buy.

A healthcare tech stock

If you want a tech stock in the early phases of its growth trajectory, VitalHub (TSX:VHI) is intriguing. Like the others, it has had a strong run this year. Its stock is up 171% in 2024, 250% in the past three years, and 464% in the past five years.

Created with Highcharts 11.4.3Vitalhub PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

VitalHub provides healthcare software solutions focused on patient flow/management, operational streamlining, and workforce management. Almost every healthcare system around the world is stressed by high demand and limited resources.

VitalHub helps health systems become more efficient and effective. Many health software systems are antiquated and ripe for disruption. This could provide many years of organic growth ahead.

Like the two stocks above, VitalHub has been a serial acquirer. The company has used equity to help it grow. It has been issuing equity at a high valuation to buy businesses at lower valuations.

While I don’t like the equity dilution, so far it has been accretive to shareholders. It’s not a cheap stock and it is a small cap, so pick it up on volatility.

Should you invest $1,000 in Terravest Industries right now?

Before you buy stock in Terravest Industries, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Terravest Industries wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robin Brown has positions in Constellation Software, Descartes Systems Group, Visa, and Vitalhub. The Motley Fool has positions in and recommends Vitalhub. The Motley Fool recommends Constellation Software, Descartes Systems Group, and Visa. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Tech Stocks

Canada day banner background design of flag
Tech Stocks

The Top Canadian Stock to Buy With $5,000 in 2025

There are few Canadian stocks out there that offer the outlook of this tech stock, bound for more growth.

Read more »

ways to boost income
Tech Stocks

How I’d Invest $11,500 in Canadian Fintech Stocks to Revolutionize My Finances

Propel Holdings stock's recent dip could be a trading opportunity for long-term financial gains. Here's why the fintech stock is…

Read more »

Start line on the highway
Tech Stocks

Where I’d Invest $5,000 in Growth Stocks With Long-Term Potential Through 2030

DO you have $5,000 to invest to grow your wealth over the long term? These growth stocks could deliver strong…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Buy the Dip on the Return of Recession Stocks?

If a recession comes back, there are some stocks that could fair well afterwards. And this is one of the…

Read more »

data center server racks glow with light
Tech Stocks

April Opportunity: Where I’d Invest $7,000 in These 3 Tech Stocks Right Now

These tech stocks have solid growth potential and are trading at discounted valuation, providing a solid buying opportunity in April.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

If I Could Only Buy and Hold a Single U.S. Stock, This Would Be It

You don’t need 40 different stocks to build wealth. A few good ones can boost your portfolio, and this U.S.…

Read more »

cloud computing
Tech Stocks

2 Top Canadian Information Technology Stocks to Buy Right Now

These two Canadian information technology stocks are bargains amid the downturn in the broader market for long-term investors.

Read more »

A microchip in a circuit board powers artificial intelligence.
Tech Stocks

The Only 2 AI Stocks You’ll Need for Long-Term Growth

Here are two top Canadian tech stocks that could help you benefit from surging demand for AI technology and infrastructure.

Read more »