Canadian stocks have largely enjoyed solid returns in 2026. The S&P/TSX Composite Index is up 11% so far this year. It is a pretty good return given all that has already happened in 2026 (tariffs, war in the Middle East, concerns about inflation, etc.).
Despite the Canadian index being up, not every stock has enjoyed such abundant returns. Software stocks and professional service stocks have been decimated by concerns about AI disruption.
Certainly, those risks are real, and investors do need to be cautious around those sectors. Yet there can also be opportunities in areas of stocks that have underperformed this year. If you don’t mind digging around in some beaten-up stocks, here are two that could be primed to surge from here.
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TMX Group: A Canadian tech stock at a reasonable price
TMX Group (TSX: X) is down 5.6% in 2026 and down 12.5% since May. This Canadian stock operates the TSX Exchange, the TSX Venture Exchange, a variety of different marketplaces, and data/analytics platforms.
Given relatively strong markets in 2026, one would think this stock would be doing well. However, like many technology stocks, it has been caught up in the AI downdraft.
The good news is that TMX has significantly diversified its service offering and geographic mix over the past few years. Its acquisitions of a variety of proprietary data platforms give it a strong advantage.
Any AI application requires data to be effective. If you own the proprietary data, you are best suited to craft that data into AI applications that help your customers. That is exactly what TMX is doing.
Last quarter, it delivered record revenue of $419 million. That was a 16% increase. Likewise, adjusted earnings per share increased 33% to $0.65.
At 20 times forward earnings, TMX is not the cheapest Canadian tech stock you will find. However, that is below its five-year average valuation of 21.5. Arguably, its business has been considerably more resilient and diversified over the past, so one could argue it deserves a premium today.
If it can continue to post double-digit revenue growth, its valuation certainly seems justified here. This is a solid growth stock that also pays a decent 1.89% dividend yield. It has a 10-year history of growing that dividend at an average annual rate of 9%, so it’s not a bad bet for income either.
Constellation Software: A quality compounder at a great price
Another Canadian stock that could be due for a recovery in 2026 is Constellation Software (TSX: CSU). Like TMX above, Constellation has been hit hard by the AI-disruption trade. Its stock is down 21% in 2026 and 43% over the year.
Constellation consolidates niche, specialized software businesses from around the world. These companies are highly entrenched with customers and tend to form a crucial backbone for their specific business.
AI may be a threat to some of its businesses. However, it is also an opportunity. Constellation is using AI to improve and enhance its software, while also providing new applications that customers are asking for.
Fortunately, this Canadian stock appears to have hit a bottom and is trending in the right upward direction. So far, Constellation has demonstrated no signs of disruption. If anything, results have only improved. Last quarter, it grew revenues by 20% and free cash flow by 44%.
Its acquisition program continues to accelerate, and it is still enjoying solid single-digit organic growth. At 13 times free cash flow and an 8% free cash flow yield, this stock is trading close to its lowest valuation in more than a decade. You may need to be patient, but at some point, the market will return to loving this underappreciated compounder again.
