I’d say most investors would likely look at the blue-chip Canadian stocks out there and come to the conclusion that most of these names are more tailored to value investors or those seeking passive income via dividends. That’s true — there are plenty of world-class dividend and value stocks to consider in the TSX.
However, there are a number of top Canadian growth stocks I continue to think could be better bets in some cases than many of the so-called Magnificent Seven names investors have gotten used to trading with impunity.
Here are three of the top Canadian growth stocks I’ve got on my watch list right now.
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Shopify
Shopify (TSX: SHOP) continues to be my top Canadian growth stock pick, and that call has worked out quite well, as the chart below shows.
Shopify’s recent performance has propelled this company to the largest market capitalization in the Canadian market. And perhaps more importantly, Shopify is now once again trading near its all-time high.
Some of this recent rise has to do with outsized growth expectations tied to the company’s AI integrations within its world-class e-commerce platform. Enabling businesses of all sizes to set up fully-integrated online stores, Shopify benefits from both a secular and cyclical trend of more shopping happening online. But as the company ramps up its monetization efforts, using AI and other efficiency-enhancing technologies to improve sales for its customers could yield outsized returns in the form of transaction fees over time.
That’s what I like about Shopify: it’s a company with a highly scalable business model that can meaningfully benefit from these sorts of investments. Unlike other AI companies that may never see the profits roll in, Shopify already is.
The Metals Company
Vancouver-based The Metals Company (NASDAQ: TMC) is still my top Canadian small-cap growth pick for investors who have a little speculative capital to put to work.
In my view, TMC could be among the best high-risk, high-upside picks in the market due to its early-stage first-mover advantage in what I think could be a very lucrative industry. And unlike other sectors such as solid-state batteries or quantum computing with uncertain commercialization timelines, TMC has received permits and has already begun early stage exploration for deep sea mining of rare earths and other battery minerals I think will be integral to the growth thesis around key industries.
As a picks-and-shovels way to play some very viable (and lucrative) long-term catalysts, TMC trading at a valuation below $5 billion makes no sense to me, given the trillions of dollars in potential opportunity down the line.
Constellation Software
One of the true old-guard Canadian growth stocks that has continued to romp many global growth stocks in the software space, Constellation Software (TSX: CSU) is a top pick of mine for investors looking for growth in this space.
Shares of CSU stock are down considerably from their peak just a couple of months ago. Some of this decline appears to be tied to a broader market shift away from companies that are viewed as too highly valued. That’s a label that Constellation Software has certainly had for a long time.
The thing is, I’ve long argued Constellation’s premium multiple is warranted. Nothing has changed on that front. Constellation acquires small- and medium-sized software companies, rolling them into the company’s portfolio and improving key metrics like return on equity and return on invested capital over time. Until those sorts of trends change, the ample opportunity for continued consolidation in this sector provides a rock-solid catalyst for investors to jump on.
Hence, I’m of the view that this dip in CSU stock is one to buy.
