After an exceptional year for the Canadian stock markets, it’s time to think about where the value is on the TSX Index as we head into the new year. As you know, TFSA (Tax-Free Savings Account) top-up season is almost here, and once January rings in, Canadian investors will have a chance to contribute another $7,000 (it’s unfortunate that it’s stuck at that level even after another year of inflation). Nonetheless, investors can use the proceeds to invest in a quality name that could appreciate significantly over the next three to five years.
Undoubtedly, there are many potential names to stash on the TFSA buy list. One could certainly stick with what’s been working all year. The big Canadian banks have been firing on all cylinders, and it might be difficult to stop them as they continue to report strong earnings. At the same time, some of the gold miners have been shining brightly for investors who’ve stood by them amid the rally in precious metal prices.
While it’s tough to tell whether the materials and financials can keep powering the TSX Index to results that have put the S&P to shame, I certainly don’t see all that much in the way of froth in the two sectors, especially if we’re talking about the industry heavyweights (notably the largest-cap gold miners and the Big Six banks).
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Shopify
Tech sensation Shopify (TSX: SHOP), though more volatile of late, has continued to be one of the shining stars for the Canadian stock market. It’s capitalizing on the AI boom, and it’s not even close to being done.
Despite recent volatility, shares of SHOP are up close to 50% year to date. That’s a stellar gain from a tech-driven company that might have more room to run, given its high growth rate, strong execution, and an incredibly high total addressable market that still seems to be expanding quickly as AI opens new long-term opportunities for the firm.
Sure, SHOP stock might seem fully valued now that its market cap is above the $300 billion level. Still, if Shopify can keep investing and collaborating with specialized partners on AI, I think the stock might still be relatively underappreciated, especially when you consider the much hotter AI software stocks out there that are up by far more in the past two years.
In a prior piece, I highlighted the fourth-quarter correction as a likely buying opportunity. And while the past-month ricochet of 9% might seem too heated to get behind as we head into the month of January, I’d argue that the stock may still be a top candidate to deliver a big growth surprise in the new year.
Bottom line
Of course, the AI revolution, I believe, is a multi-year (even multi-decade) one, so investors should be patient and seek to build a position over many quarters, rather than seeking to trade and make a quick profit over the matter of a few short months. At the end of the day, Shopify’s a secular growth story that doesn’t deserve to go for cheap.
