The best growth stocks can deliver truly astounding returns over relatively short periods. Probably one of the best growth stocks in recent history has been Constellation Software (TSX:CSU). $10,000 invested in the stock in mid-2010 would be worth $360,000 today.
In other words, this phenomenal growth stock turned the average price of a car into the average price of a house in less than 10 years. That’s the sort of return stock investors dream about, but rarely achieve. So, it’s worth taking a closer look at what made Constellation so successful and which stock could be the next multibagger.
Growth stock characteristics
Some of the best growth stocks have three common characteristics: a visionary leader, an immense market opportunity and a high-margin business model.
Constellation’s leader, Mark Leonard, is widely considered to be a pioneer of the software venture capital industry. He focused on enterprise technology companies and figured out a way to measure their value earlier than most investors. His track record over the past three decades speaks for itself.
Meanwhile, Constellation’s target market – enterprise software – is a US$360 billion global industry. That means there was plenty of room for the company to expand via acquisitions. Also, software is probably one of the most lucrative and high-margin business models around. The confluence of these factors made this growth stock a success.
The next Constellation
I believe the next Constellation is a relatively obscure tech company with a visionary leader and a massive market opportunity.
Stocks like Goodfood Market, Shopify and WELL Health Technologies seem to fit the bill. All three industries – grocery delivery, e-commerce and telehealth – are immense. Meanwhile, entrepreneurs such as Shopify’s Tobi Lutke have cemented their reputation as visionary leaders.
Drone Delivery Canada is yet another top growth stock pick. The company is in its early phases of developing a commercially viable drone delivery system. If successful, the stock could skyrocket as the team extends its lead in the market and dominates the multi-billion-dollar autonomous delivery industry in Canada.
Another unimaginable large opportunity is space tech. Maxar Technologies has a similarly early lead in this sector and the company could bounce back sharply if it manages to restructure itself soon. Maxar stock has already doubled since late-March, so the rebound could already be underway.
These growth stocks could deliver multifold returns over the next 10 years. If you’re a growth investor, you simply can’t afford to overlook these rising stars.
Bottom line
Some growth stocks surpass all expectations. Investors who picked Constellation Software in 2010 would never have imagined that their investment would skyrocket like this over the next decade. Yet, here we are.
It’s similarly difficult to predict the future. Most hyper-growth stocks fizzle out or fail to live up to expectations. But if you have a sizable portfolio, you could spread your bets across the most promising growth stocks.
I believe WELL Health Technologies, Goodfood Market and Maxar stand out as the most attractive growth opportunities around. Add them to your list.
