The TSX Index is really heating up, now up just under 5% in the past month and over 25% year to date. As impressive as the performance has been, the Canadian stock market still looks much cheaper than that of the U.S. names, especially the tech titans that are sporting premium valuations amid the surge in AI growth hopes.
While valuations are certainly richer today, even on the TSX Index, than just a few months ago, that does not necessarily mean it’s time to freeze (or sell) stocks as a long-term investor. Of course, it’s only prudent to insist on low valuations, but in a market where it’s tough to search for value, I’d encourage investors to brace for the dips and have enough money to put to work when others are inclined to run scared.
On average, the tech sector (in the U.S. and Canada) still seems quite rich. However, if you’re willing to dig deeper into the individual names, I still think there are great deals to be had. And as the broad market looks to run into a bit of a roadblock of sorts, I think the art of stock-picking will be back in full force, if it isn’t already. Given how many have embraced indexing, I’d say there’s more relative outperformance to be had by stock pickers who have a smart playbook.
It’s more about having a game plan, though; one must be incredibly patient and not let emotions run things. At the end of the day, if you can temper your emotions in the market’s ups and downs while seizing opportunities, I think there are opportunities to do incredibly well, perhaps even better than the S&P 500.
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Celestica
Shares of red-hot semi play Celestica (TSX: CLS) are still down close to 10% from their peak. But with more than 175% in gains enjoyed over the past six months, such a correction seems like the tiniest of blips that might not even be worth buying into. Of course, Celestica’s stock has more than tripled this year, with more than 1,100% gains in the last two years.
And while the explosive AI winner could certainly be dealt considerable downside if the AI trade ends up going up in smoke, I think risk-taking growth investors might wish to watch the name very closely as it rolls over more roadbumps into 2026.
At the end of the day, AI is a revolutionary technology that growth investors should be exposed to, even if it means dealing with extreme choppiness (shares of CLS have a 1.5 beta). The company is growing its earnings really fast, and if the AI bulls, and not the bubble watchers, prove correct, I think CLS stock’s next march could be higher.
In my view, Celestica is one of those high-risk names that younger investors should keep tabs on. So, if you believe AI is more than just a bubble, I think CLS stock is a great Canadian way to play the boom. At 37.5 times forward price-to-earnings (P/E), I’ve certainly seen pricier AI stocks, some of which may not have growth profiles nearly as impressive as Celestica’s. I suppose it all comes down to whether Celestica can blow away the results again. If it can repeat them, perhaps there’s more room to run as structural tailwinds stay strong or get even stronger.
In short, Celestica is a market-beater and perhaps the Canadian AI stock to stand by as the revolution advances at a blistering pace.
