Worried about technological volatility? Buy this technology stock 1 for decades
Investors should try to buy a stake in companies they understand. This rule or saying has been approved and taught by most of the investment gurus. But how well do you need to understand a business, its business, and the industry at large before you justified investing in it is subject to debate.
A good rule of thumb is that you need to know enough about a company so that you don’t buy or throw away its stock just because of hearsay in the market and be able to form your own conclusion. The rule is relatively easier to follow in industries where most companies are quite similar. Energy, banking, and utilities are relatively easy businesses to understand. Additionally, these areas tend to be a bit more static compared to others.
Tech companies, however, are generally difficult to understand for many investors (especially those who don’t have a particular affinity for technology). This is especially true for companies created around unique and disruptive technologies. The technology sector can sometimes also be more volatile than other relatively stable sectors.
What if you want to invest in a tech company that could offer more stability compared to the larger industry? and the one you can hang on to for decades, Constellation Software (TSX: CSU) deserves to be considered.
Constellation Software was founded in 1995. Since its inception, it buys and owns software companies and has purchased over 500 companies since its inception 25 years ago. It focuses on vertical market software companies, that is, companies that develop software and services for a very specific niche market or customer base.
Constellation’s acquisition strategy has paid off as it has increased revenue and net income steadily over the past decade. It has six operating groups, each focusing on a specific industry. His Volaris group, for example, focuses on agribusiness, biosciences, retail, education, justice and several other businesses. These groups also have overlapping areas of interest.
Constellation has proven itself when comes to growth. And it doesn’t just offer consistency; it also offers powerful potential for capital growth. It has a 10-year CAGR of 39.9%, which means that if it can continue to grow at that rate, it can make you a millionaire in about two decades, with relatively little invested capital.
If you had invested $ 10,000 in the business exactly twenty years ago, you would now be sitting at over $ 850,000 (with dividends reinvested) with that investment alone. The company has maintained its incredible rate of growth so far, and the likelihood of it continuing to do so is relatively high.
Constellation usually trades at a higher price, but that’s usual for a stock with a growth history like this. It is one of the few stocks that did not start to grow abnormally fast after the 2020 crash, and as a result, it did not decline as much as many others in the industry when the growth momentum s ‘is exhausted. It’s one of the few tech stocks that you can buy and forget for decades.
Speaking of a tech stock that can help you avoid industry volatility …
Should you invest $ 1,000 in Tesla right now?
Before you consider Tesla, you might want to hear this.
Motley Fool Canadian Chief Investment Advisor, Iain Butler, and his team Stock Advisor Canada just revealed what they think are the 10 best stocks investors can buy right now … and Tesla was not one of them.
The online investment service they have been running since 2013, Motley Fool Stock Advisor Canada, has beaten the stock market more than 3 times. And right now, they think there are 10 stocks that are better buys.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
Foolish contributor Adam Othman has no position on the stocks mentioned. The Motley Fool owns shares and recommends Constellation Software.