Constellation Software Inc. (CSU.TO)

Here is a company that has gone around buying up other software companies. Now we are late in the investment cycle. The multiple got to a high level so he would expect consolidation.

Tricky name. Widely owned. They have to continuously do deals to show good return on invested capital and they might make a mistake. That is his fear on this stock.

(Past Top Pick Sept.18, 2017, Up39%) They will consolidate for a while. They've come off lately, but have performed well this year. Their challenge is that as they acquire software companies to grow, so they have to either buy bigger or more companies to maintain their pace of growth.

Net income has been flat for three years. To move the needle, they have to make a lot of or bigger acquisitions. Historically, this has done well, but today it's expensive. Management is very arrogant--it won't do a conference call with investors. He doesn't like that; communicating with investors is fundamental. No clear strategy; it's a hodge-podge of small companies.

One of the best run tech companies. Growth by acquisition. Not cheap at 35x earnings. Beautiful chart. Top-drawer management. If you’re not worried about the valuation, it’s fine to own it.

They've bought a lot of little companies that specialize in "vertical applications" which fulfill a single purpose and do it well. They then divided them into six divisions they manage. They could aquire far more, so they have a big possibility of growth. The street didn't like their last quarter, but investors should look at the long-term: can they use their capital wisely to make these acqusitions? Yes. Based on the past, they are smart acquirers with 31% ROE on these purchases. Smart managers. (0.5% dividend, Analysts' price target: $1,073.58)

As long as its longer-term uptrend remains intact, he'll continue to like it, and consider the near-term pullback as a buying opportunity. (0.6% dividend, Analysts' price target $1,083.64)