One Canadian software stock has delivered roughly a 486% total return over the decade through July 2026. A $7,000 investment matching that result would now be worth approximately $41,000. The gain is large enough to make the sell button look like responsible adult supervision. Yet a rising price and a broken investment thesis aren’t the same thing.
Selling a winner feels safer because the profit is visible while future compounding remains imaginary. That bias can be costly with growth stocks. Many long-term winners look expensive several times during their journey. The share price rises, earnings catch up, and a patient owner benefits from both.
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A better sell test
Before selling, ask whether the company’s competitive advantage has weakened, its reinvestment runway has narrowed, or its valuation now requires flawless results. Then check the position size. If one holding has swallowed the portfolio, trimming to restore portfolio diversification can be sensible. Exiting solely because the stock has done well is market timing wearing tidy clothes.
Selling removes not only today’s risk but also tomorrow’s earnings growth. Taxes can also reduce the capital available to reinvest in a non-registered account. A deliberate trim can solve concentration. A full sale needs a stronger case.
CSU
Constellation Software (TSX: CSU) is the company behind that roughly 486% decade-long return. It owns more than 1,000 vertical-market-software businesses serving specialized customers. Think software for municipalities, dealerships, transit agencies, hospitals, and other niches where replacing a core system would be expensive, disruptive, and deeply unpopular.
Those businesses usually generate recurring revenue and cash flow. Constellation stock lets its operating groups run independently, then redeploys their cash into more acquisitions. The machine doesn’t require one blockbuster product. It requires thousands of disciplined decisions.
The latest test
Second-quarter revenue increased 17% year over year to US$3.34 billion. Free cash flow available to shareholders rose 57% to US$345 million, while Constellation stock completed acquisitions carrying total consideration of US$893 million. It had another US$818 million of completed or committed deals after quarter-end.
The softer figure was 3% organic growth, or 1% after currency effects. Acquisitions still provide most of the lift. That makes deal quality crucial as Constellation stock grows and must put increasingly large sums to work. A mediocre billion-dollar purchase hurts more than a mediocre US$20 million one.
The real risks
Constellation stock recently sat about 15% below a $3,500 fair-value estimate, according to analysts. That estimate assumes roughly 14% annual revenue growth over five years and values the company near 26 times 2026 adjusted earnings. The price is more inviting than its old high, although this still isn’t clearance-bin software.
The main risk is declining acquisition returns. Competition can raise purchase prices, while larger targets may offer weaker economics. Artificial intelligence (AI) could reduce switching costs or pressure pricing in some legacy products. Founder Mark Leonard’s move away from the president role also tests whether the culture can outlast its architect.
Bottom line
At the recent price, a $7,000 contribution buys two full shares for $5,981.98, leaving $1,018.02. I’d start modestly and add over time. Existing owners should monitor organic growth, acquisition spending, and cash flow rather than the size of their unrealized gain.
Constellation stock won’t repeat its past return automatically. If its deal discipline deteriorates or the position becomes uncomfortably large, trimming or selling could make sense. If the acquisition engine remains productive, however, selling simply because the stock has already surged could sacrifice the compounding an investor spent years waiting to own.
