If you are new to investing and don’t know where to begin, you might ask more seasoned investors for advice. Many of them might tell you to start focusing on defensive and boring assets to kick things off before you move on to investments that carry a higher degree of risk. The thing is, a well-balanced portfolio cannot perform well without holdings that are riskier than others.
Investing in growth stocks means you should have a higher tolerance for risk. Suppose that you have already started building your portfolio and have plenty of risk-averse holdings to offset potential losses, and you now want to dip your feet in riskier assets. In that case, the two stocks I will discuss today should be on your radar, if not in your portfolio.
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Tecsys
Tecsys Inc. (TSX: TCS) is a $513.6 million market-capitalization company that engages in developing and selling enterprise supply chain management software for distribution, warehousing, transportation logistics, and more. The business provides its services to clients across several sectors of the economy. Tecsys offers solutions to real-world problems for its clients, carving out a niche that cannot easily be replaced.
The company has recently shifted to a Software-as-a-Service (SaaS) model, letting it generate consistent and recurring revenue instead of relying on one-time licensing fees from its clients. The move has made a massive difference in its profit margins, and its cash flows have become predictable.
The company is profitable, it reinvests earnings to fuel innovation, and its management does not show interest in risky acquisitions. As of this writing, Tecsys stock trades for $34.64 per share, and I think it is too cheaply priced to ignore.
Kinaxis
Kinaxis Inc. (TSX: KXS) is the better-known name between the two. The $4.9 billion market-cap giant is a provider of software solutions for supply chain management and sales and operations planning. The Ottawa-headquartered business provides the supply chain management software that major corporations need to plan, monitor, and adapt to the changing logistical challenges that modern businesses face.
Its flagship offering, the RapidResponse platform, lets its clients simulate demand challenges in real time. This ability helps businesses make mission-critical decisions, which is crucial for success. Kinaxis also relies on a SaaS model, generating recurring revenue. The quality of its service also means it has high client retention. The company has grown its revenue steadily over the years, and its free cash flow remains strong.
As of this writing, Kinaxis stock trades for $172.71. Down by around 18% from its 52-week high, it might be the right time to invest in its shares to leverage a recovery in its share prices.
Foolish takeaway
Tech stocks are typically riskier than most others, as is evident in the industry track record over the last few years. However, there are pockets within the industry that go against the grain, offering predictability and consistency. Kinaxis stock and Tecsys stock boast the kind of qualities typically lacking in the software space that make them feel like more reliable investments.
If you can stomach the risk that comes with it and have a well-balanced portfolio that needs a growth injection, Tecsys stock and Kinaxis stock can be excellent holdings to consider for this purpose.
