Technology was the second-best represented sector on a list of the top performing stocks on the Toronto Stock Exchange, providing a clear sign that the lagging group may finally be ready to take on more prominence in Canada.
On Tuesday, TMX released its annual TSX30, a list that ranks the 30 companies that have seen the highest dividend-adjusted share appreciation over the past three years. Last year, the list was dominated by mining companies and, given that gold and silver prices have skyrocketed, it was no surprise to see an even greater number of them — 14 — included this year.
The tech sector, however, has quietly earned five slots on the list, including top spot. Shares of Shopify Inc. have surged by 1,043 per cent over the past three years as the company has rapidly grown from a local gem into the largest company in the country by market capitalization.
“If you reflect on where we were seven to eight years ago in the tech sector in Canada and where we are today, we’ve come a long way,” said Loui Anastasopoulos, TMX Group president, Capital Formation. “What’s happened over the past few years is (that) a significant tech base has been developed that can support these companies.”
Along with Shopify, Enghouse Systems Ltd., Real Matters Inc., Kinaxis Inc. and Constellation Software Inc. were included in the TSX30.
The list reflects the differences between the Canadian and U.S. public markets. Were a similar list forged in the U.S., it would predominately be made up of names in the tech sector — think Apple Inc., Tesla Inc., NVIDIA Corp., Amazon.com Inc. and Netflix Inc. Canada isn’t there yet and it’s difficult to foresee a scenario where it can be home to multiple trillion-dollar tech companies, but there are several signs pointing to an expansion, Anastasopoulos said.
For one, the IPO market is accelerating. Last year, Lightspeed POS Inc. went public with a $240 million raise and its stock is up more than 150 per cent since. Software company Dye and Durham Ltd. followed in July with a $150 million offering and its stock has already surged by more than 200 per cent. Payments processor Nuvei Corp. will join them in September after a US$270 million raise.
Ten years ago, tech stocks represented just five per cent of the companies listed on TMX exchanges, Anastasopoulos said, and now it’s closer to 10 per cent.
A significant tech base has been developed that can support these companies
The success of Shopify has inspired more tech companies to discuss a possible listing with TMX, Anastasopoulos said. The company has brought a halo effect of sorts to the sector. Up-and-comers looking to go public regularly bring up the company as an example to follow — they want to know what it did to be so successful and what it did wrong so they can avoid the same mistakes, he said.
That’s a departure from the pattern many Canadian tech startups followed in the past, when building a business as a private entity with the goal of being acquired by a U.S. tech giant or fund was the preferred model. Now, they’re not only thinking about going public, they’re moving up their timelines.
“We’ve seen a marked increase in the conversations we’ve been having with private companies in our prospect pipeline,” Anastasopoulos said. “A lot of these companies that we thought were in the later stage of our pipeline and we thought could come to market four to five years down the road seem to be accelerating their thinking about coming to market much sooner.”
Because of this, Anastasopoulos is bullish on tech moving forward, and there’s still plenty of room for growth. Tech still holds a minor presence on the S&P/TSX Composite Index with a 10 per cent weighting. On the S&P 500, the tech sector accounts for nearly a 26 per cent weighting. But give it another five years, Anastasopoulos said, and that divide will have certainly been narrowed.
These are the top-performing Canadian companies over the past three years:
1. Shopify Inc.
2. Ballard Power Systems Inc.
3. Cronos Group Inc.
4. Kirkland Lake Gold
5. Alacer Gold Corp.
6. International Tower Hill Mines Ltd.
7. Wesdome Gold Mines Ltd.
8. Dundee Precious Metals Inc.
9. Teranga Gold Corporation
10. Cargojet Inc.
11. Neptune Wellness Solutions Inc.
12. Trilogy Metals Inc.
13. Village Farms International Inc.
14. Orla Mining Ltd.
15. Enghouse Systems Ltd.
16. Trisura Group Ltd.
17. Aurinia Pharmaceuticals Inc.
18. Canopy Growth Corp.
19. Champion Iron Ltd.
20. Goodfood Market Corp.
21. Sandstorm Gold Ltd.
22. Real Matters Inc.
23. Wheaton Precious Metals Corp.
24. Sprott Inc.
25. Yamana Gold Inc.
26. Kinaxis Inc.
27. Constellation Software Inc.
28. Lundin Gold Inc.
29. SSR Mining Inc.
30. Richards Packaging Income Fund
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