We often talk about buying the dip, but the dip comes amid uncertainty. The tariff war has raised fears of a structural change in the trade order. The United States trade deficit has once again come into the limelight.
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Now is the time to build a million-dollar portfolio
If we look back at Donald Trump’s last presidential term from 2017-2021, his “America first” approach remains intact. His policies around protectionism and economic growth speak for themselves. He is doing it again, but this time starting with the tariffs. Hopefully, corporate tax cuts and deregulation may follow to promote industrial jobs in the United States.
While the person and intent are the same, the execution has become too aggressive, which has investors worried. A full-blown tariff war was bound to create market volatility. The markets react to change, and when the change is drastic, so is the market volatility.
In the long term, the corporations would adjust to the new normal, and the stocks would begin a rally. The TSX and Nasdaq have absorbed the Russia-Ukraine war and the global pandemic, which have changed the course of trade. Many winners emerged from these crises, and the overall market prospered. Those who invested even in the market and resilient, evergreen stocks saw their portfolio grow.
Top stocks to build an eventual million-dollar portfolio
The market downturn is a good time to invest large amounts in specific sectors and stocks that prosper with the economy. In Canada and the United States, the technology sector has delivered strong returns over the last decade despite the 2018 U.S.-China trade war, pandemic, and high interest rates.
It is because technology is reshaping the way we live, work, communicate, and consume content. Each industry of the economy uses technology, and technology companies operate globally. In this context, a company with a diversified client base across verticals, low debt, and technology relevant in the future can grow your portfolio significantly.
Tech stocks
Constellation Software (TSX:CSU), though a tech stock, operates as a private equity company. It has a portfolio of hundreds of vertical-specific software companies catering to mission-critical applications of clients worldwide. From traffic management to communication to financial services, it earns maintenance and professional fees from hundreds of companies. Even if one vertical or one geography is affected, other verticals or geographies can offset the decline.
Moreover, Constellation has low debt as it funds its acquisitions from internal cash flows. This is a ripe time to buy stocks as the management at Constellation might be on an acquisition spree, buying strong software companies at a Black Friday-like discount. When the economy recovers, Constellation’s earnings could see a sharp jump from the accretion of revenue and cash flows of the acquired companies.
If you don’t have the liquidity to buy a $4,670 share, you could opt for iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT). This exchange-traded fund’s (ETF’s) biggest holding of 26.14% is Constellation Software. Moreover, the ETF gives you exposure to some lucrative Canadian tech stocks like Shopify, which has been riding the e-commerce wave, and Celestica, which has been making server and network equipment for artificial intelligence (AI) and 5G.
The XIT ETF unit price has dipped 20% since February, creating an opportunity to grab future tech growth at a 20% discount.
Finance stock
The financial sector prospered in Trump’s last presidency as tariffs were accompanied by lower corporate taxes and economic growth. Power Corporation of Canada (TSX:POW) is a financial holding company that holds Great-West Life Company and IGM Financial. While Great-West holds insurance companies in the United States, Canada, and Europe, IGM operates asset management companies in these geographies and Asia. POW creates a compelling growth case for insurance in an uncertain market and for asset management in a growing market. Its net asset value was $60.44 as of December 31, 2024, and the stock is trading at an 18% discount after it dipped 8% in the April reciprocal tariff.
Market volatility is where hedge funds make money, and POW earns dividends.
You can watch out for more for other such buy-the-dip opportunities.
