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Canada Tech Stocks Benefit From Brexit and Trade War

Debra Ray
Financial technology concept.
Financial technology concept.

One good thing emerging from the volatility of Brexit and the U.S. trade war with China is the booming technology sector in Canada. Technology stocks like Shopify soared in value this year as trade tensions created a surplus of technology capital.

These three technology stocks are even more popular than Shopify stock today. Open Text (TSX:OTEX)(NASDAQ:OTEX), Lightspeed POS (TSX:LSPD) and CGI Inc (TSX:GIB-A)(NYSE:CGI) are three of the top five most active technology stocks on the TSX by volume.

Volume is a good indication of demand at a given supply (shares outstanding) and price.

Open Text

Open Text is a software company that provides enterprises with artificial intelligence and data analytics solutions for automation. The corporation boasts partnerships with large technology companies and public sector agencies.

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Artificial intelligence and data analytics are a huge growth opportunity for the technology sector. While Canadian investors still want to discriminate to find the best options they can in this sector, almost all advanced machine learning stocks and automation technologies will bring in returns of over 30%, averaged across the next 20 years.

Open Text is an excellent option because it issues a dividend yield of 1.73% at the current stock price of $53.67 at writing. Dividend yields are equivalent to an interest rate you earn on each share of stock. The higher the cost of the stock, the lower your return. Likewise, lower stock prices mean better yielding assets.

Lightspeed POS

Lightspeed POS provides commerce software for small and medium-sized businesses. Its Software as a Service (SaaS) platform facilitates payment processing and customer management activities so that companies can best track inventory and sales.

SaaS was huge and will continue to be important in the next five years. Payments processing and fintech innovation are undoubtedly huge avenues for profit, but this area has robust competition from major corporations like Amazon and PayPal. Moreover, Infrastructure as a Service (IaaS) and cloud technology are quickly replacing SaaS as a top growth opportunity in the technology sector.

Lightspeed POS might not be worth the risk given that it offers no dividends. Canadian savers interested in giving this stock a chance would not be misguided. The price on the stock has only appreciated since March; however, this trend may not continue through next year.

CGI Inc

CGI is a global information technology company that manages IT outsourcing, cybersecurity, and application development. This stock boasts clients in the government, financial services, and health.

CGI has government clients, and stocks with secure connections to the Canadian government tend to do better than other corporations. Shopify is an excellent example of how government connections can help a company succeed even if it suffers from large, negative margins.

Unlike Shopify, CGI is in cybersecurity – another technology growth area. Cybersecurity is increasingly becoming more critical. Canadian technology companies have a great chance at building a competitive advantage if the country markets itself as a trusted leader amid the U.S.-China trade war.

Foolish takeaway

Canadian investors should take note of the growing interest in the Canadian technology sector. The world is in a drought for technology talent, and even companies in the Silicon Valley are interested in leveraging the expertise in Canada’s major metropolitan areas.

This is good news for aspiring Canadian retirees. Every retirement portfolio should have healthy investments in high-growth technology stocks like Open Text, Lightspeed, and CGI.

More reading

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Debra Ray has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon, Lightspeed POS Inc, PayPal Holdings, and Shopify. Shopify, CGI and Open Text are recommendations of Stock Advisor Canada.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019