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Written by Nicholas Dobroruka at The Motley Fool Canada
In the five years prior to the COVID-19 pandemic, tech stocks had led the way for growth investors. But since early 2020, there’s been a lot of volatility within the tech sector. That’s led to many top tech companies trailing the market’s performance over the past year and a half.
We’re still not yet past this pandemic, so I wouldn’t expect the high levels of volatility to end just yet. That being said, I wouldn’t let that stop you from investing in high-valued tech companies today.
As a long-term Canadian investor, I’m planning on holding stocks I’m buying today for the next decade and longer. That allows me to wait out any volatility in the short term, whether it’s caused by the pandemic or high valuation.
Investing in high-growth tech stocks
Valuations and volatility are both high in the tech sector today, which makes having an updated watch list that much more important. Dramatic market swings can cause even the more seasoned investors to make rash decisions during times of uncertainty.
A watch list pushes you to follow a strategy that you decided on with a clear mind. So, when a list of top tech stocks go on sale, you know exactly which companies to pick up shares of. All you need to do is follow your predetermined watch list.
Here’s a list of three market-leading tech stocks that should be on all growth investor’s radars this month. I’m already a shareholder of two of these companies, but I’m ready to add to both of those positions.
At a market cap of more than $200 billion, Shopify (TSX:SHOP)(NYSE:SHOP) is the largest public company in Canada. Shares are up more than 3,000% over the past five years, which partly explains why it’s valued at such a high market cap.
It shouldn’t come as a surprise to hear that this tech stock is richly valued. A 30-bagger in five years will cost investors a premium to pick up shares.
Shopify is still managing to grow quarterly revenue at an impressive rate. But at its current market cap size, I wouldn’t bank on a repeat performance for the stock over the next five years.
I’d argue that the next two tech companies on this list have more multi-bagger growth potential in the coming years than Shopify. I certainly wouldn’t bet against Shopify to continue delivering market-crushing growth, though.
Growth of the digital payments space
When it comes to investing, it’s rarely a zero-sum game. There can be multiple winners in one area of the market. That’s something that we have seen time and time again over the years in the stock market.
Digital payments is one area of the market that I’m bullish on over the next decade and longer. We’ve already witnessed a surge in growth for many leaders in the digital payments space price prior to 2020, and the pandemic has only sped up that growth, as more and more people are choosing not to pay with cash.
The two tech stocks are relatively new to the TSX. Lightspeed joined in early 2019, and shares are up more than 700%. Nuvei became a public company just over one year ago, and the stock is already up just about 250%.
It’s not cheap to be a shareholder of either of the two tech stocks as both are trading at serious premiums. But if you’re bullish on the rise of digital payments, I strongly believe both companies are worth paying up for to own.
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Fool contributor Nicholas Dobroruka owns shares of Lightspeed POS Inc and Shopify. The Motley Fool owns shares of and recommends Lightspeed POS Inc. and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify.