The Canadian stock market has been experiencing some volatility recently, with numerous risks that could potentially disrupt it. Stock valuations remain relatively high, and it may not take much to trigger a market selloff.
However, the silver lining is that a significant market correction could present an opportunity to invest in high-quality growth stocks. Now is the time to conduct thorough research and create a list of stocks to consider when prices decline. If you’re looking for growth stocks to add to your portfolio during a correction, here are three options to consider with a $5,000 investment.
A Small-Cap Growth Stock: VitalHub (TSX:VHI)
VitalHub, with a market capitalization of $605 million, had an outstanding performance in 2024, with its stock rising over 170%. The company specializes in software solutions for the healthcare industry, focusing on improving healthcare management and patient outcomes. Given that healthcare software is often outdated, this sector is ripe for disruption, offering VitalHub significant growth potential in the long term.
With no debt and a recent equity financing that has bolstered its cash reserves, VitalHub is well-positioned to make acquisitions to expand both its product offerings and geographic reach. While the stock isn’t the cheapest at the moment, its long-term growth prospects make it an attractive option if it experiences a pullback in 2025.
A Mid-Cap Growth Stock: MDA Space (TSX:MDA)
MDA Space, valued at $2.9 billion, designs and manufactures advanced space technologies, focusing on satellites, space robotics, and geo-intelligence. Over the past five years, MDA has posted impressive compound annual growth rates (CAGR) of 25% in revenues and 52% in adjusted net income. For fiscal 2024, the company anticipates 30% revenue growth.
MDA also boasts a substantial backlog of $4.6 billion in orders, ensuring more than four years of revenue even if no new projects are added. With the space market expected to grow rapidly in the coming years, MDA is well-positioned to benefit from this expansion, providing a strong growth tailwind for the company.
A Large-Cap Growth Stock: Constellation Software (TSX:CSU)
Constellation Software, a top large-cap stock, is an excellent choice if the market experiences a correction. Recently, its stock briefly surpassed the $5,000 mark, pushing its market capitalization close to $105 billion.
Despite its size, Constellation Software remains one of Canada’s best growth companies, with an average annual return of over 34% over the past 19 years. While such returns may be difficult to replicate, the company still has ample growth opportunities. It operates about 1,000 decentralized vertical market software (VMS) businesses, with over 50,000 VMS businesses worldwide. This provides significant room for further market consolidation.
Additionally, Constellation has spun off a few companies in recent years, and further spinouts are likely. The company is also highly diversified and economically resilient, making it a solid bet for both growth and safety in 2025 and beyond.
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