Stock Up Sale
Younger Tax-Free Savings Account (TFSA) investors may wish to pursue growth stocks while time is still on their side. Indeed, it’s never a bad idea to reach for the defensive dividend stocks, especially if you’re a tad rattled by big swings in markets. Just because Canadian stocks (the TSX Index specifically) are flirting with new highs again after a brief dip doesn’t mean you shouldn’t be ready to keep on rolling with the volatility. There will always be events that can cause us to fall into a bit of a panic.
Most of the time, making panic-driven decisions (think selling at a loss) is a mistake. Though recent swings in markets have been major, I’d encourage investors to think back to the 2020 stock market crash caused by a viral outbreak that eventually evolved into a worldwide pandemic. Yes, pandemics are scary, but selling after the market crash proved incredibly ill-timed.
Don’t panic when the market sells off violently!
Those who bought on the panic walked away with very sharp gains. And while it’s unlikely we’ll have another such steep V-shaped move in markets, I still think that it makes sense to be just a bit more bullish when most others around you become bearish seemingly overnight on events whose magnitude is uncertain.
More recently, a surprise Japanese rate hike caused stocks to take a nosedive. It was really tough to know what was happening in the heat of the selloff. What exactly is a Japanese currency carry trade? And could the associated selling from its deterioration lead to some sort of market-wide contagion?
It was hard to tell. But, as it turned out, there wasn’t as much for investors to get worried over. Eventually, the stock plunge corrected to the upside and it was back to bargain-hunting for investors who were interested in putting cash to work on weakness.
Though I have no idea if the recent V-shaped bounce from the August selloff will reverse course next month, I see value in the following name. Perhaps it makes sense to dollar-cost average into the name over time, so you’re not shocked by a potential revisitation of August lows in September or at some point in the fourth quarter.
Constellation Software
Constellation Software (TSX:CSU) is a fantastic company to pursue whenever shares slip into a correction. Though the 11% correction has now been reduced to a 5.5% dip (around half of the losses from July and August recouped), I still see value in the name at nearly $4,200 per share.
The company has continued to make very smart deals in the Canadian software scene. In many ways, it’s a growth-by-acquisition type of firm that can create value steadily over time by putting its excess cash to work. In the last quarter, Constellation saw revenues surge by 21%. That’s an incredible jump.
More growth could be ahead as the firm looks to make the most of recent deals. For Canadian investors seeking growth in the smaller side of software, CSU stock is a top pick in the long run. Over the past decade, shares have risen over 1,445%, a meteoric rise.
Though such gains seem highly unlikely for the next decade, I’d not be surprised if the firm eventually appreciates such that its valuation eclipses $300 billion within the next five to 10 years. It’s a well-run company with a growth model that’s not just respectable but sustainable.
