Chris Blumas Constellation Software Inc. CSU-T TOP PICK Apr 16, 2025

Best software company in Canada. Growth by acquisition makes him pause, as things go well until that final acquisition hurts. Great job buying and integrating businesses. Growth being priced at an excessive premium. Solid growth but high, 40x multiple. 

He targets $4,900. It hasn't been hit like Shopify or Celestica, because CSU has so many horizontals. Microsoft has a software that is applied in many ways, but CSU is different. CSU applies their various software to specific industries, like a healthcare vertical/software. This diversification lowers volatility. Likes it.

One of a kind. One of the best compounders in the world. Big misconception is that the total addressable market is not that big. Fear that can't deploy capital for the same rate of return going forward as it has in the past. He very much disagrees with that. 

The addressable market is huge. Of course with a larger acquisition, you can't expect the same 25-30% after-tax rates of return. But on a blended basis, can still compound at very high rates of return. Yield is 0.13%.

Claim to fame, and with tremendous success, has been to buy stable and cash-growing assets at the right price. One potential negative is whether it's hitting the law of large numbers? Now it needs larger deals to run the same playbook, and at a time when sophisticated private equity is starting to do the same thing.

Valuation is not cheap by any stretch, but you have to look at free cashflow per share and compare the growth. PE tends to be a bit messy with depreciation. Not as exorbitant as the PE ratio would suggest. Core position in Canadian portfolios.

She doesn't know why either :)  Valuation is pretty high. Strong management team. Her firm stays away from companies that are just focused on M&A growth. M&A works until it doesn't. As a company gets bigger, so do the acquisitions in order to move the needle.

The chart looks mahvelous ;)  It's in an uptrend, and the trend is your friend till it ends. Try to buy on the dips that approach the trendline. He's near-term cautious on the markets, so it could pull back closer to trend; if it did, he'd be all over it. If you own it, don't bother selling on the dip.

A rather mysterious and opaque company. Well held, well owned, and people hold onto it for dear life. Massive compounder of 36,000% since the IPO in 2006. Acquires mission-critical, vertical market (narrow of scope -- such as an operating management system for a vet clinic or daycare or golf course) software companies. 

Tuck-in acquisitions are usually founder-led, mom & pop software companies. They keep the incumbent management team and equip them with operating efficiencies. Hundreds of acquisitions a year. Compound EPS growth at 24% over the last decade. Stock's richly valued as always at 40x PE. Fair combination of value and growth. Can't quarrel with the track record. Yield is 0.11%.

Owns 1,000 software businesses through acquisition. Lots of growth going forward as it buys more. Sees more spinoffs to come. Mark Leonard is best capital allocator in the world, and partnering with them is how long-term investors make a lot of money. See his firm's deep-dive podcast on this name at baskinwealth.com. Yield is 0.11%.

Founder-run, founder-owned. Very strong and consistent ROIC. Doesn't require a lot of capital growth. Uses a bit of debt, but it's done very effectively because it's able to generate such strong returns. Decentralized model lets them download capital allocation decisions from head office to the business units. Only drawback now is valuation, but quality does cost.

For long-term-focused investors, there really is no better company on the planet. High-quality, exceptional business.