After an intense bullish phase, the TSX Capped Information Technology Index has changed directions and has slipped over 4.5% in the last few weeks. However, many tech stocks are still bullish. One bullish stock and two discounted tech picks look promising for this month.
An electronics company
Celestica (TSX:CLS) is a hardware/electronics company with a diverse portfolio, including hardware solutions like storage, computing, and networking. All three are in demand thanks to the artificial intelligence (AI) boom, particularly computing.
The company has two business segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). In the last quarter, the CCS segment experienced a 42% revenue hike.
This is one of the few factors that has recently brought the company more investor attention and caused the stock to skyrocket 285% in the last 12 months, and the momentum is not slowing down. Even if the momentum carries for a few more months before plateauing or turning, the returns might be more substantial than what many modest growth stocks offer in a few years.
A European software company
Topicus.Com (TSXV:TOI) combines two companies, Topicus and Total Specific Solutions (TSS), based in the Netherlands. Both of these are holding companies for various software businesses that target specific vertical markets, mainly in Europe. TSS holds 185 companies and works in 26 different verticals. Topics have a relatively narrow focus, including healthcare and education.
Topics.Com stock has only been around since early 2021 and is currently in its second bull market phase. This bull market has propelled the company over 90% in roughly two years and four months.
That’s an annualized growth of approximately 38%, and at this pace, this company can double its capital in less than three years, assuming it can keep this pace up. It’s also discounted right now and down 12% from its yearly peak.
An acquisition-oriented software company
With a market capitalization of over $91 billion and a massive global footprint, Constellation Software (TSX:CSU) is a cherished blue-chip stock and one of the most rewarding growth stocks currently trading on the TSX.
Topicus is among the six companies currently under the Constellation umbrella. These six companies hold hundreds of individual software businesses and have 125,000 clients in a hundred countries.
Few stocks have a performance track record comparable to Constellation. Even though its growth pace has slowed down, it’s still in a class of its own in terms of consistency and returns. The stock has returned over 200% in the last five years, and assuming it maintains this pace, it can offer four-fold returns in a decade. It’s also trading at a moderate 9.7% discount right now.
Foolish takeaway
The three stocks look quite promising not just for this month but as long-term holdings as well. Constellation has the longest and most consistent performance history and Topicus has a very similar business model, endorsing its long-term potential. Celestica is currently propped up by market dynamics that are likely to remain relevant for several years.
