The tech sector is undoubtedly one of the most exciting global industries, and it has been for several years. Newer investors starting to invest in the stock market often look for high-growth opportunities that can give them substantial and rapid returns. However, seasoned investors with a long investment horizon know better than to hedge all their bets on risky investments.
Investing in tech stocks can be a great way to enjoy sizeable returns, but the industry’s constant shifts increase the risk factor. Typically, it is far better to make riskier investments when you have a well-balanced portfolio to offset potential losses. All of this said, not every tech stock is a high-risk investment. Investors interested in this industry and with a sizeable amount to allocate to a reliable tech company can consider investing in Constellation Software (TSX: CSU).
Boasting a $106.86 billion market capitalization, this tech stock has stood the test of time and proven itself a winner for investors time and again. Let’s take a better look at the stock and why it still is the smartest holding to consider adding to your self-directed portfolio.
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A reliable business model
Constellation Software is atypical among tech stocks. The company was founded around 30 years ago by Mark Leonard, and it engages in acquiring, managing, and building up vertical market software businesses across several sectors, private and government-related. The software companies it acquires typically create specialized software for various sectors.
Constellation does not invest in startups or up-and-coming software companies. Instead, it focuses solely on successful businesses with the potential to be even better. After bringing these companies under its banner, it uses its sizeable capital to help these companies fulfill and exceed that potential. The result is a win-win scenario, where the companies under its belt grow and contribute to its growth.
The focused approach minimizes risks associated with startups, single companies, or any specific industry-related factors. The result is an efficient, growth-focused, minimum-risk business model that drives greater value for the stock and its investors.
As of this writing, Constellation Software stock trades for $5,042.62 per share. Since the company went public, it has delivered 27,455.30% growth through capital gains alone. It is also one of the few TSX tech stocks that pays regular quarterly dividends to its shareholders.
Foolish takeaway
The almost unbelievable growth figure is indeed true, and its past performance is a strong indicator of future growth potential. Its most recent earnings paint a clear picture for the possibility of getting solid returns by investing in the stock, even at current levels.
Its most recent quarter ended in December 2024. Constellation Software reported $6.6 billion in revenue, up by 14% from the same quarter in the previous year. The company’s net income grew by 10%. Constellation Software has an appealing balance sheet due to its disciplined financial management.
The global tech industry is only going to grow from here, and Constellation Software is a company well-positioned to leverage the sector’s growth to provide better and better shareholder value for years to come. If you’re interested in making a strong bet in the tech sector, CSU stock can be a solid pick to consider.
