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Summer Stock Spotlight: The One Pick You Can’t Miss This Season

As summer rapidly approaches, Canadian investors might be pondering which stocks they should begin cashing out on as profits rise and which ones remain attractively priced for purchase. It’s clear that numerous novice investors aim to acquire assets at lower prices and later offload them when their value increases. However, deciding how to trim holdings within one’s long-term portfolio becomes crucial.

TFSA

(Tax-Free Savings Account) or

RRSP

The Registered Retirement Savings Plan for winners might not be the most optimal approach, particularly if you own shares of a continually thriving champion.

In truth, how often have you rung the register on a sizzling stock just to see it keep climbing afterward once you’ve clicked that sell button? Much like Mr. Market remains oblivious to your purchase of a stock, he’s also unaware when you decide to offload it, allowing him to carry on adjusting the price either higher or lower regardless of what you did.

Holding onto your successful investments can pay off, as long as their valuations remain reasonable.

Selling winning stocks seems dubious, particularly for someone aiming to invest over an extensive period instead of seeking rapid gains within a handful of months. Although periodic rebalancing by offloading overly valued assets might be advisable even for long-term investors, my view is that unloading a share solely due to its appreciation doesn’t hold much water.

In short, offloading a stock when its market price climbs higher than what you believe its true worth to be—indicating it might be overpriced—is sound advice. Ultimately, this boils down to comparing the market’s outlook with your personal assessment. Even as a share price increases, the stock could remain undervalued if the underlying fundamentals of the business are enhancing significantly.

How often do we come across a stock that has become less expensive as time goes on?

These companies have the potential to grow into their apparently lofty valuations, making them seem like they might actually be undervalued retrospectively. Although assessing their true worth can be challenging, I believe that offloading such consistent top performers could lead to missing out on future winners set for continued success. Regardless, this article will examine one reliable stock that remains worthy of investment as we approach the summertime.

A purchase recommendation: Shopify

First up on my list is the beloved e-commerce technology company

Shopify

(

TSX:SHOP

The share prices have surged dramatically over the last month, currently climbing by 36%. Despite remaining significantly lower than their peak levels from the past year and even further from historic highs, I believe this recent upward trend positions the stock as an attractive option for investors looking to capitalize on the emerging positive momentum. However, with a trailing price-to-earnings ratio exceeding 90, the stock appears quite pricey.

In spite of this, I believe the AI beneficiary has the potential to grow significantly despite its current “frothy” valuation. Given that the company has listed on the Nasdaq, it might be time for American investors to start paying closer attention. Regardless, I am optimistic about its long-term prospects and prefer holding onto my shares rather than selling, particularly considering their strong performance over the past month.

Once the

TSX Index

Inevitably, SHOP stock might falter, putting it at risk for a downturn. Regardless, I would consider such declines as chances to buy more if you plan to hold onto the shares for a minimum of seven years. Shopify is a distinctive company with the potential to position Canada on the global high-tech stage, should it not have done so already!

The post

1 Purchase This Stock Before Summer Arrives

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More reading

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  The Top Canadian Equities to Purchase Instantly With $30K
  
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  TSX Today: Key Stock Movements to Track on Thursday, May 15
  

Fool contributor

Joey Frenette

does not hold any shares in the stocks discussed. However, The Motley Fool holds positions in and recommends Shopify. The Motley Fool also has a

disclosure policy

.