Instead of lightening up in May with the intention of going away (perhaps the sell-in-May crowd plans its return in the fall?), investors may wish to play the long game as the TSX Index looks to experience some sort of upside breakout.
Undoubtedly, the TSX has been weighed down for a while, and though only time will tell what we’ll have for summer, I think investors selling their stocks shouldn’t be too surprised if markets stay getting hot for summer. Though lightening up could make sense if you’re a bit short on dry powder, I wouldn’t blindly subscribe to the “sell-in-May-and-go-away” phrase, especially this year.
As the much-awaited breakout for the Canadian stock market takes hold, investors should stash the modestly priced growth plays on their radar. In this piece, we’ll quickly check in with two that seem like they could continue strong into year’s end. Without further ado, consider the following stocks.
Thomson Reuters
Thomson Reuters (TSX:TRI) stock has quietly outperformed the TSX Index over the past two, five, and 10 years. Over the past two years, the media and information firm has surged over 88%. Those impressive gains are supported by stellar quarterly results. Just one month ago, Thomson Reuters beat its first-quarter (Q1) revenue expectations while also hiking the annual dividend by 10%. Moving ahead, I’d look for the firm to set its laser focus on artificial intelligece (AI).
Management noted a bit about its “AI product roadmap” and how acquisitions fit into the overall story. Undoubtedly, Thomson Reuters has not only been investing in AI tech, but it’s also on the hunt for some small fish in the AI pond.
Indeed, Thomson Reuters is, in fact, an AI play. At writing, shares go for 32.4 times trailing price to earnings. It’s not cheap, especially after the latest spike. That said, I’d watch the $103.4 billion juggernaut closely for any bumps in the road. Such dips ought to be viewed as potentially favourable entry points.
Constellation Software
Constellation Software (TSX:CSU) is another wonderful Canadian business that has plenty of room to grow in the coming years. The firm has a magnifying glass on the Canadian software scene, hungry for promising, potentially overlooked firms that could grow to become something special.
Shares of CSU have also handsomely outpaced the TSX Index in the past two years, rising around 98%. Undoubtedly, that’s an impressive gain that should have the full attention of Canadian investors seeking domestic ways to beat the TSX Index consistently over the long haul.
On Friday, Constellation Software stock sunk more than 2%. Though not much of a dip, I would keep CSU stock atop my radar in case a correction takes hold. Undoubtedly, any past corrections have proven to be great times to load up.
At around 34 times forward price to earnings, shares are slightly on the expensive side. But I’d argue they deserve to sport a hefty premium. Perhaps nibbling into a starter position makes sense here as the stock retreats below the $3,850 level of resistance en route to potentially lower levels.
