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The 2019 Bear Market Is Good for Canada’s Tech Stocks

Debra Ray
A brown bear sitting on a rock

Brexit and U.S. negotiations with China have the market on edge this week. Moreover, PG&E is pulling markets lower after shutting down power for nearly 400,000 customers in the Bay Area, California.

Many Canadian investors are uneasy about where to put their money as stocks move to new lows. Nevertheless, now is the perfect time to pick up new positions in battered stocks.

Technology stocks are a great option in Canada. Silicon Valley is losing steam as the North American technology capital; increasingly, Canadian technology companies like Shopify are a hot destination for surplus technology capital.

Stock prices on Optiva (TSX:OPT) and Sangoma Technologies (TSXV:STC) climbed on Thursday. Bears have long been pessimistic on these two Canadian technology stocks, but the U.S. trade war with China might boost their earnings.

Optiva and Sangoma stocks provide the telecommunications industry with software to manage billing and customer experiences. With the Canadian 5G rollout on the horizon and rural broadband internet expansion moving forward, Canadian telecom servicers like Optiva and Sangoma stand a good chance of benefiting from the higher earnings potential.

Optiva

Optiva fell victim to a speculative bubble in 2013 when traders inflated the price to nearly $300 per share. Up until the summer of 2017, the stock has been crashing in a downward correction. Today, it sells for $43.39 at the time of writing.

The company has been attracting new customers in the past year, and it may have U.S. president Donald Trump to thank for it. Notably, Optiva announced a new contract with a Middle East tier one telecom operator in August.

The telecommunications servicer also boasts a customer presence in the Asian-Pacific telecommunications market.

National security and telecommunications are strongly intertwined. Telecommunications networks are prime targets for cyber warfare activities. If Canadian companies like Optiva can gain the trust of foreign governments, Canada can establish itself as a leader in technology exports.

Sangoma Technologies

Sangoma Technologies is a venture exchange-traded Voice over Internet Protocol, which should gain handsomely from rural broadband expansions and the transition to the 5G network. The stock has been gaining impressive momentum lately.

Although it was trading for only $0.34 in 2017, it now sells for $1.50 as of Thursday, October 10. In February, the TSX Venture 50 ranked Sangoma as a top 10 technology company in Canada.

This is one stock Canadian investors will want to watch going into the year 2021, as it has strong potential to become a market leader in broadband communications. Canadians who purchase stock in Sangoma for the long term may see alpha-level returns in the next 10 years.

Foolish takeaway

Canadians should be looking for tomorrow’s technology gainers on the TSX. Silicon Valley has quickly become saturated with tech startups. Neither the labour force nor the housing market in California can sustain the growth in the technology sector.

As a result, Canadian tech is gaining a significant competitive advantage. Record levels of capital are flowing into the Canadian technology sector.

Telecommunications and cloud-based software services are the best technology companies to invest in today. Aspiring Canadian retirees will do well to add these stocks to their retirement portfolios in 2019.

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Fool contributor Debra Ray has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and Shopify. Shopify is a recommendation of Stock Advisor Canada.

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