Constellation Software Inc. (CSU.TO)

The dip now is a phenomenal opportunity. Metrics haven't been this low in a decade. LLM's like Anthropic are chasing big companies like CSU, which will help LLM's customers to integrate with their product. The moat around CSU is misunderstood.

Vertical software segments such as transit system scheduling or golf course management. Obvious fears of AI, and there is some legitimacy there. Its advantage is that it’s had to resolve all these “edge” issues over the years -- all the little exceptions to the rules that crop up. A new company would have to start from scratch on that front. 

New strategy of acquiring smaller stakes in larger companies -- acts as a defence against AI. Trades at 15x forward PE, cheapest in 13 years. Yield is 0.23%.

He sold it when the relative strength came off, and has since crumbled a lot. It's trying to stabilize now. He's not convinced it will rise. Given the strong sell-off, it may need to go sideways for a while.

Rollup stories tend to run out of steam at some point. Double whammy -- high valuation + concern that software is going away. Probably will have a bounce, but he can't say when, and it probably won't get back to previous levels.

Ignore the noise. Are so well positioned. Software companies are cheaper now. Barriers for entry for AI are high, he feels. CSU trades at attractive valuations. Buy for the long term.

Never owned it due to high PE and they grow by acquisition, whereas she wants to see some organic growth in a company. Are concerns after the CEO resigned, and now there are AI concerns, since they buy software companies. To maintain their growth rate, they have to buy larger and larger companies.

It has changed its business model from its storied days. It used to buy small software companies in the $5 to $7 million range, but has changed to bigger companies and getting more competition with other bidders and which are taking longer to play out. It more recently started buying public companies. Their selection is more limited and it is buying companies that other companies are often interested in. It is time to move on to something else since there is not the same rate of return. However it has had a tremendous run and is one of the most successful stocks on the TSX.

If you own, continue to hold. With AI, growth model to buy other companies doesn't seem the right way going forward. See if management can turn things around, giving them 18 months minimum.

Probably one of the highest compounding rates of return over last 15 years. AI concerns are probably overdone. Earnings reported today continue to be strong. Acquisition targets now much cheaper.

Before buying, he'd want to see the price stabilize and more positive technical metrics. Value investors can start building a position.

CEO left. AI fears. The question is what are you willing to pay for this company? People were paying 30-40x PE for a long time. Its business model is operating in a different world now.

Company will still exist. Volatility will remain. You may be able to buy it cheaper.

One of the best-run companies in NA. Solid. Trading ~15x forward PE, cheaper than ever. If you don't own it now, you probably never will. Because it makes acquisitions, those targets are now trading at lower valuations and so embedded returns should be higher.

For its customers, they click a button and the software does what they need it to do. They're not thinking about upgrading or changing what works. So AI is on the radar, but not an immediate threat.

Valuation always excessive for minimal organic growth and acquisitions that become harder to move the needle. AI fears, CEO left. Now trades at 12x operating cashflow. Strategy hasn't changed. 

Strong cash balance and free cashflow can now take advantage in acquiring software players that have been hurt. Private equity is a big competitor, but that space is facing concerns right now. So M&A should pick up dramatically. Yield is 0.20%.

If you've owned it for a long time, you're still in the money and so congratulations. Not a huge fan. Just a hodge-podge of companies with no real vertical integration. Valuation was extreme, and the melting story is a valuation check.

Question becomes whether it's worthwhile replacing a software offering with an AI solution? Possibly yes for large ones, and no for small. Remains to be seen. Valuation keeps him away.

The market is in full-blown panic about CSU, whether AI is disrupting and whether CSU will continue to buy companies at the same pace under the new CEO. They will provide clarity through a conference call with management and talk about AI implementation. Remember that the company can use AI within their own business to save costs or writing code more efficiently. They could upgrade a lot of their software with AI.

A great growth story over 20 years, but their long-serving CEO retired last year and shares declined. This is a show-me story. Also, it has been hit by AI fears. Trades at 10x EV to EBITDA, half its historic values. Hang on if you own it. Eventually, we will realize we still need software. There are worse places than CSU to put your money.