Canadian investors are always looking for deals. Yet those deals tend to consider cheap companies when it comes to share price. Low share prices, however, don’t necessarily mean you’re getting a deal. In fact, it could even be a signal of lower prices to come.
Which is why it can actually be a great idea to look at expensive stocks. Especially if you’re looking to create a base for your growth portfolio. In that case, two companies that immediately come to mind when considering expensive stocks. But these companies are soaring. What’s more, they’re soaring upwards with very minimal dips. So let’s look at why I’d still buy these high-priced stocks without a moment’s hesitation.
Fairfax stock
Fairfax Financial Holdings (TSX:FFH) is one of the highest priced companies on the TSX today. However, in the last year it’s been one of the best performers as well. Shares of FFH stock are currently up 67% in the last year, despite trading at around $1,500 as of writing.
The company has a long track record of solid financial performance. The stock consistently delivers underwriting profits, a key metric in the company’s industry, insurance.
It also has undervalued potential, with a strong balance sheet from conservative investments, especially bonds. However it’s also run by Prem Watsa, the long-time chief executive officer, referred to as the Canadian Warren Buffett. This comes from his focus on value investments.
That value is furthermore focused on long-term accumulation. So again, this makes Fairfax a strong choice if you’re looking for a stock that’s going to be a base for your growth portfolio. And one that will keep climbing from its property and casualty insurance assets.
Constellation stock
The other high-priced item on the TSX today is Constellation Software (TSX:CSU), with shares currently at a whopping $3,770 as of writing. Yet again, that’s with further stable growth of 62% in the last year alone as of writing.
This is a wild one, as it’s a tech stock that’s simply found a lucrative way of creating income. That comes from acquiring software companies offering niche products at a low price. And this has led to exceptional growth over time, with consistent revenue and earnings growth, often exceeding 30% annually.
This has generated high profit margins for the company, with strong operational efficiency and a strong overall business model. It’s now a free cash flow machine, so it continues to have the ability to invest in even more companies.
Mark Leonard has been the CEO since its founding and continues to focus on long-term value creation, much like Watsa. And that focus has only narrowed in the last few decades. What’s more, the vertical software market remains highly fragmented, leading to even more opportunities in the future for CSU stock.
So with recurring revenue on hand, more acquired companies in the future, and predictable cash flows, this stock is solid as a long-term investment. Yet even for growth, it has more tech tailwinds coming its way for investors to consider. That makes it another stock I’d pick up with zero hesitation.
