I think it’s safe to say that many people investing in the stock market hope to one day create generational wealth — that is, wealth that can be passed down to their children and their children’s children. However, in order to achieve that, you’ll need to be disciplined and consistent in your investing behaviour for many years. In addition, you’ll need to invest in the right companies that can potentially generate those kinds of returns. In this article, I’ll discuss three stocks that could do just that.
This is my favourite stock
When it comes to stocks that could create generational wealth, there’s no company that comes to mind faster, for me, than Constellation Software (TSX:CSU). This company is a tech conglomerate. In my opinion, it’s also one of the greatest Canadian businesses out there. However, because Constellation Software doesn’t operate a consumer-facing business, most Canadians likely will never know about it.
Constellation Software’s business focuses on acquiring outstanding vertical market software (VMS) businesses. It then provides those acquisitions with the resources needed to become outstanding business units. Since its founding in the 1990s, Constellation Software has managed to perfect its acquisition strategy, targeting the most optimal businesses in order to strengthen the company. This is reflected in Constellation Software’s stock price, which has gained about 265% over the past five years.
Another outstanding stock for your portfolio
Shopify (TSX:SHOP) is another company that could create generational wealth for investors. This company has emerged as a leader within the global e-commerce industry. It provides merchants of all sizes with a platform and many of the tools necessary to operate online stores. It’s estimated that more than a million merchants worldwide rely on Shopify to power their online marketplaces. This includes large-cap enterprises like Netflix.
In its third-quarter (Q3) 2023 earnings presentation, Shopify reported US$1.7 billion in quarterly revenue. That represents a massive 25% increase year over year. In addition, Shopify continues to hold a 10% share of the massive U.S. ecommerce market. These successes have been reflected in Shopify’s stock price, which has risen more than 55% over the past year.
Don’t forget international companies
Finally, Canadians shouldn’t discount the importance of investing in international companies. Although the Canadian stock market offers us a large number of great businesses to invest in, buying shares of companies that are based in other countries can help you diversify your portfolio. This can allow investors to seek different avenues for growth and potentially add a layer of security should the Canadian economy fall into difficult times.
One foreign company that I think could create generational wealth is Microsoft (NASDAQ:MSFT). This is a company that has always been among those that push our technological capabilities to new heights. From its world-renowned Windows platform to Xbox, Azure, and now Copilot, Microsoft continues to push the boundaries of what we’re able to do. I believe this is an outstanding company that can continue to grow for a very long time.
