Constellation Software Inc. (CSU.TO)

Trading in a sideways range between $3900 and support around $3550. He likes to see this consolidation, especially if it hasn't gone down or broken down, as it suggests very solid accumulation underneath. 

$4000 is a big round number, could present significant resistance. If it went through, that would be a breakout, and measuring $400 from the channel would suggest the next resistance would be around $4400.

CSU is a “one of a kind” software company as the company did not pump up its AI theme compared to other Saas businesses. CSU grew through small acquisitions, while most public Saas grew by acquiring customers through marketing spending. CSU has no stock-based comp (SBC), while most large public SAAs have a large SBC as a component of their cost structure. CSU is unique, and what determines the share price performance is fundamentals. AI could make CSU’s offerings become more efficient, adding value to its customers, and therefore, making price increases easier, but it has never been the core selling point of this vertical market software.
Unlock Premium - Try 5i Free

Makes small acquisitions, doesn't overpay, cautious with the balance sheet. Lots of great opportunities going forward. He likes the up-and-to-the-right businesses.

Grows at 20% a year. Hints that the next spinoff will be its transportation group. With each spinoff, most of the cashflow and earnings stream back up to the parent. Thinks stock will be worth 20% more a year from now.

Great growth story cutting through all the noise. We want to see it get through where it is right now. May pause and come back a bit. Expects markets to be a bit soft for the next few weeks. Fantastic business model, nicely growing. If it breaks above its early January high, which it's trying to do right now, look to add.

Tongue in cheek, he estimates that in 5 years, price will double from today; in 10 years, quadruple. That's based on 15% compounding every year; at that rate, your investment doubles every 5 years. He doesn't actually set price targets. His largest holding at 15%.

Must look at fundamentals of the business. For CSU, haven't changed; in fact, have gotten stronger. Deploys increasingly large amounts of capital, disciplined in looking for high rates of return before acquiring. Founder-run, founder-owned. High margins. Not much debt. High and consistent ROIC. Well run.

12-month price target of $3980. Poster child for Canadian tech. He'd still buy 1/3 here around $3740. Buy another 1/3 if you see it around $3550, and the final 1/3 at $3325. So well managed. All about vertical integration, a great way to expand. He has a full position at 4.5%.

Great-looking profile. Uptrend since 2022, got overbought, now pulling back. Healthy right here. If you own it, hold, and look to buy more.

With some companies, you wait for a pullback to enter but it never comes. On his radar. Small change in strategy, looking at larger deals. Great capital allocators. The spinouts can continue the work of the smaller deals. 

Owns shares in company - longtime owner. Excellent company with history of compounding capital at strong rate. Largest software company in Canada (private). Vertical market software (niche business use) roll up strategy has proven very fruitful. Recurring revenue excellent for bottom line. On track for continued growth. Owner/operator mindset very good for investors. Company can be compared to a private equity company that specialized in software. 

Without a doubt, one of the best investments you could have made. Management is unbelievable. Sound business, wonderful balance sheet. As a value investor, does he really wants to pay 35-40x earnings for the hope that the past will repeat? Much steeper incline at that valuation to repeat the same sort of return.

Always looks expensive. Phenomenal job of underlying business. Very well run. Wishes he had a time machine to go back and buy it cheaper.

Probably one of the best capital compounders in the world. But the secret's out. Very few years that it hasn't had a positive return. (Research reveals that going back to 2006, 2022 was the only year not positive.) Excels at small deals that private equity firms won't do, and this lets them keep growing. Spins off lots of cash. Loves it. Valuation is rich.

Don't focus on PE. There are some nuances to amortization that make earnings look quite low, and PE look in excess of 100x. Look at price-to-cashflow or FCF yield. Trades somewhere around 30-32x cashflow, fairly reasonable multiple, comparable to a MSFT. Wait for a pullback, if you can get it.

Everyone wants it, so they pay up for it. There hasn't been a year in his career that he hasn't been able to add it to client portfolios. Take advantage of volatility on a bad quarter or headline news. Don't chase, just be patient.

Very strong company with high margins and cash flow growth. Capital allocation skills very strong. Re-investment into the business allows company to compound company at a high rate. Would recommend investors buy. 

Currently in long term up trend. Very good for investors. Excellent chart and technical analysis. Is a great option for the long term investor. High margin business with excellent management team.