Despite all the tariff jitters and economic headwinds, the TSX Index is off to a pretty good start to the year, with the index up more than 5% so far, better than the S&P 500, which is just shy of 1% higher year to date. Though it’s tough to tell what the second half holds, I do think the odds favour the TSX Index as investors look to pay more attention to the value trade while trimming profits from the recent tech relief run.
In this piece, we’ll check in on a few growth stocks that could still stand tall over the next two to three years. Though the tech trade is getting hotter again, the following names, I believe, seem to still have valuations that are punching well below their weight class. Without further ado, let’s check out two growth stocks that could help TFSA investors build generational wealth.
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Constellation Software
Constellation Software (TSX: CSU) is starting to become a must-watch growth stock for young investors looking to build wealth over the decades. Undoubtedly, the stock looks quite pricey on the surface, now going for more than 100 times trailing price-to-earnings (P/E). That’s lofty, even for a firm with a proven track record of growing earnings and sales via smart, strategic M&A. Though a premium is warranted on the name, I’d much rather wait for a steeper pullback before getting aggressive with hitting the buy button.
With the stock up a modest 10% year to date, shares are faring quite well, at least compared to some of the choppier high-tech plays south of the border. In the second half, investors should look for Constellation to get a bit more active on the acquisition front, especially as AI becomes a bigger needle-mover for small software companies (prime takeover targets for a firm like Constellation). Perhaps Constellation is wise to be a bit quieter with M&A in the first half, given the recent volatility and tariff hailstorm that could continue to weigh most heavily on the tech sector.
Alphabet
Alphabet (NASDAQ: GOOG) stock is another value play for investors looking for a steep discount to intrinsic value. Of course, the major story of the year for Alphabet has to be the disruptive potential of AI search platforms and the potential impact on the Google Search business.
In many ways, it seems like Google’s best days are in the rear-view. Time will tell if Google’s Search moat will be eroded away. In any case, I don’t think the search giant is on its way out, especially as it spends a great deal on AI innovations like Veo, Gemini, and more. If Google spends in the right places, perhaps the disrupted could become a disruptor in other markets beyond the search scene.
With an 18.5 times forward price-to-earnings (P/E) multiple, I view GOOG as a deep-value stock that’s hiding in plain sight this June. In the second half, look for antitrust headwinds and search fears to subside, as more focus shifts to what the firm is doing right on the AI front. Perhaps any losses suffered by the search business could be made up for in other AI-driven areas.
