While the TSX Index has been a winner in 2026, many high-quality TSX stocks have not been so fortunate. Many well-known growth stocks have faced substantial declines this year.
If you don’t mind being a contrarian, you can pick up these stocks at attractive valuations. Here are two of the best TSX stocks I would be happy buying before they recover.
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A top TSX software stock to buy now
With a market cap of $60 billion, Constellation Software (TSX: CSU) is Canada’s largest software company. While this TSX stock is up 2% in the past month, it is down 16% in 2026 and 43% over the past year.
Constellation has been drawn down along with the entire software sector. Fears around artificial intelligence (AI) disruption have trampled the sector.
Yet, many don’t recognize that Constellation is not just a software company. There are over 1,000 specialized software companies around the world. The company consolidates small software companies and turns them into cash-generating machines.
Some of these companies face disruption risks. Yet, many can also be winners from AI-enhancing development speed and application optionality. This year, it has drastically accelerated its software acquisition pace. It has already spent $768 million acquiring more software businesses into its fold.
In its recent quarter, revenue rose 20%, including 6% organic growth. Free cash flows rose 44%. Yet, Constellation is trading close to its lowest valuation in the past 10 years. If the company continues to execute as it has, it could be a very good opportunity to add the stock now. You may need to be patient, but this could be a very good time to accumulate shares for the long term.
A top global capital markets company
With a market cap of $13 billion, TMX Group (TSX: X) is an essential company for Canadian capital markets. It operates the Toronto Stock Exchange, the Toronto Venture Exchange, and a variety of trading, derivative, and data/market research platforms.
Its stock is down 7% in 2026 and 15% over the past year. Yet, the company has quietly been transforming into a steady compounder. Currently, over 51% of its income is recurring. Likewise, it has diversified its income, where nearly half comes from outside Canada.
In its most recent quarter, revenues grew 16% (a new record) and adjusted diluted earnings per share increased 33%. While its listing business is stable, global insights and derivatives/commodities platforms continue to be a growth engine.
For a company aiming to grow earnings per share by a double-digit rate over the coming years, TMX doesn’t look overly pricey at 20-times earnings per share.
Right now, it trades with a 1.9% dividend yield that is amply supported by cash flows (a 40% payout ratio). It has a record of growing its dividend by a 9-12% annualized rate, so there is income upside from buying this stock now.
While there are some concerns about AI impacting this business, it also presents an opportunity to buy it at a below-average valuation. Investors will get upside as it continues to grow its portfolio of recurring income services. This is one TSX stock I’d be looking to add to before it recovers.
