Market downturn: increase the stock of growth

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Central banks are expected to continue raising interest rates in the near term to curb inflation which is still very high. Compared to the Bank of Canada’s target of around 2%, the most recent inflation rate in August was 7%.

As the stock market continues to slow, investors should consider adding high-quality stocks in order to build wealth in the long term. The key is to use the excess money in purchases to ensure that you will not need to take advantage of this investment money at a loss in the near term should prices drop. Here are a couple of growth stocks that you can buy more of over time, as market volatility provides low buying opportunities.

First-class technical stock

Constellation Program (TSX: CSU) is a great business and easily one of the top performing stocks in TSX at the long term. For example, it has outperformed the Canadian stock market in the last three, five and ten years. In the long run, there is a fundamental difference in wealth formation. Its 10-year annual return is approximately 36.8% versus the Canadian stock market’s return of approximately 8.4% in this period.

Notably, tech stocks have been trading sideways since the second half of 2021. Higher interest rates increase the cost of capital for companies, which could slow Constellation Software’s M&A activities in the short term.

Constellation Software is such a quality company that technology stocks are hardly ever sold. Even during the pandemic market crash of March 2020, it traded around 40 times earnings, which is roughly the multiple it’s trading now. At around $1,926 per share at the time of writing, analysts have a consensus 12-month price target that is a decent discount of around 25%.

Growth balance in the financial services space

exhausted (TSX: GSY) (TSX: GSY) stock’s (TSX: GSY) 36.1% annualized returns are also pretty impressive. After hitting a 52-week high of $218 a share, the growth stock is down about 46% to nearly $117 a share. At about 10.7 times earnings, that’s below the long-term historical valuation. That is, it is a reasonable assessment of stock accumulation for long-term growth.

The near-term weight in the growth balance includes concerns about higher interest rates and the potential for higher loan losses. Its latest net discount rate of 9.3% in Q2 (Q2) was in line with the leading Canadian consumer lender’s target range of 8.5% to 10.5%. Moreover, the loan loss provision ratio improved slightly by 0.10% to 7.68% in the second quarter versus the first quarter due to the improved product and credit mix in the loan portfolio.

goeasy also offers a good dividend yield of 3.1%. It will continue to increase its profits over time in the long run.

The foolish investor’s takeaway

Nobody knows how long the market will remain dormant in this interesting economic environment. However, due to the capital tightening, it would be smart for foolish investors to loosen up, load up and build big financial positions over time.

Constellation Software and goeasy are both growth stocks with strong returns potential in the long run. Investors who can tolerate market volatility in the near and medium term can see their fortunes swell over the next decade and beyond. Don’t just rely on these two TSX stocks, though.

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