Big investment returns are going to be hard to find for Canadian stocks this year. With trade tensions, economic concerns, and political uncertainty, there are plenty of factors that could derail Canadian stocks.
The good news is these challenges won’t last forever. Stocks in great businesses tend to quickly revert upward. If you can pick high-quality stocks at a discount to their average valuation, you can really accelerate longer-term returns. If you are looking for some stock ideas to pick up on recent market volatility, here are three to consider now.
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A top Canadian compounder stock
Constellation Software (TSX: CSU) stock is down nearly 7% in the past month. This Canadian stock doesn’t tend to fluctuate much, so any further pullback in 2025 could create a great buying opportunity.
Constellation operates hundreds of small, focused software businesses around the world. These companies are often niche and in stagnant markets. Its secret sauce is its ability to generate significant free cash flow and then reinvest it into more businesses at high rates of return.
Constellation’s software tends to be economically resilient. It often serves an essential operational function to its customers. However, its small markets mean there is limited competition and switching costs are high.
This Canadian stock is one of the best-performing stocks in North America. It is up over 25,000% since it was listed in 2008. It trades for 26 times free cash flow. It is not cheap. However, if that ratio went closer to 20, it would be an incredible buy.
A mid-cap with plenty of growth ahead
Another Canadian stock that could be a great buy in 2025 is Trisura Group (TSX: TSU). With a market cap of $1.5 billion, this is not a very well-known Canadian stock. It has specialty insurance and insurance fronting operations in Canada and the United States.
The company has been in a buildout phase for the past couple of years. It needed to establish the infrastructure and strategy for its next growth phase, particularly in the United States. That process is largely complete. It is now ready to start reaping from those investments. Several analysts believe it could grow by 10-15% for many years ahead.
This Canadian stock is down 25% in the past year. With a forward price-to-earnings ratio of 10, its stock price looks very attractive here. This is a higher-risk stock, but the upside could be considerable if you are patient.
This Canadian blue-chip stock is starting to look attractive
Canadian Pacific Kansas City (TSX: CP) is a Canadian blue-chip stock that is starting to look interesting. Its stock is down 9% in the past six months. This could be an opportunity for a long-term investor.
Since its acquisition of Kansas City Southern, CP has transformed into a rail leader in North America. It operates the only transport network that spans Canada, the U.S., and Mexico.
Regardless of what the U.S. president says, the North American supply chain is heavily integrated. It will be difficult, if not impossible, to deconstruct what has been built over the past several decades.
CP is using the trade challenges to deliver creative solutions to suppliers. It continues to believe 2025 could be a banner year of mid-to-high teens growth. It has a top operating platform and a leading management team. CP is a great, steady compounder. If you can pick it up at an attractive valuation, it would be worth the addition in 2025.
