Canada is home to some amazing growth stocks, but they don’t always get the same acclaim as other stocks in the United States. That is actually a benefit for Canadian investors.
There are many reasons Canadian growth stocks are attractive
Many Canadian companies have substantial global businesses. Yet, they don’t get the recognition like their American peers. As a result, you can pick them up earlier in their growth phase and at more attractive valuations.
Likewise, many of these quality growth stocks can quietly and steadily compound incredible value for shareholders. Yet, the public may have never even heard of these companies. If you are looking to deploy $1,000 into some new, hardly-heard-of growth stocks, here’s a top large-cap stock and a top small-cap stock to contemplate buying.
Canada’s largest tech stock that almost nobody has heard of
Constellation Software (TSX:CSU) is a wonderful example of a hidden gem stock. With a market cap of $94 billion, it is one of the largest software businesses in Canada. Yet, it is likely that most Canadians wouldn’t even be able to name one of its operating companies.
Constellation operates over 1,000 specialized software businesses around the world. It may operate the software platform that helps people borrow a book from a library, or keep score at a bowling club, or track the completion of a home construction project.
These are not flashy software businesses. However, they are essential to their customer base, and they tend to serve them very well.
Constellation has delivered +25% compounded annual returns for more than a decade. Its formula of acquiring niche software businesses, optimizing them for free cash flow, and redeploying the cash into more businesses has been very successful. It is a winning formula that the company should keep replicating.
Recently, the market got jittery as Constellation’s growth is possibly slowing. The stock pulled back over 10% making the valuation look attractive. Every time the stock has declined on worries about slowing growth, it has been a great buying opportunity.
While this growth stock trades for $4,438 per share, most discount brokerages allow for fractional share purchases. If you had $1,000 to spend, you could buy 23% of a share. It’s one of Canada’s most defensive growth stocks to buy. Why not buy it when the valuation looks attractive?
A small-cap growth stock with decades of growth ahead
Firan Technology (TSX:FTG) is another under-the-radar Canadian growth stock. Even though it only has a market cap of $281 million, it has delivered exceptional returns for shareholders. Its stock is up 518% in the past five years.
Firan manufactures essential cockpit and circuit board components for the aerospace industry. It focuses on several specific aircraft and establishes a solid industry niche. Smart acquisitions have propelled this business to new heights in recent years. It has provided geographic, customer, and product diversification.
As a result, this business is more resilient than ever. The aerospace market has a huge backlog of demand for new, efficient aircraft. This will fuel long-term opportunities for Firan.
Only now is the market starting to recognize the quality of Firan’s business. While this growth stock is up 91% this year, it’s a great stock to add if it were to pull back in a broader market decline.
