Constellation Software Inc. (CSU.TO)

A great company and very well-managed. A consolidator of software companies, and their strategy continues to work. (See Top Picks.)

CSU-T vs. FIH.U-T vs. GOOGL-Q. You have several different options here. He likes FIH.U-T’s exposure to India. He thinks India is one of the great overlooked growth stories. GOOGL-Q is one of the death stars. It has run to quite an extent. He thinks it has a good year to run yet. This is one that will be around in one form or another for a long time.

A very successfully run company. They’ve been very successful with their acquisitions. In term of a technology company they’ve done very well. From a value investor perspective the multiple is a little out of reach. Feels it could be very vulnerable to a significant downturn in the market and wouldn’t recommend buying at this point.

Grows by acquisition. Expected to have earnings growth of 17%. Earnings are expected to go from $27.50 to $32, which is a 17% lift, but you are paying a 22X price earnings multiple. In the top 10% of his database.

Debenture.Probably the best capital allocator in Canada. He likes this debenture, because it has a high yield of almost 7%. It is not well known and is under the radar. It also has an element of inflation protection. The yield is rather unique in that it is set at 6.5% plus the trailing CPI inflation rate. If you think inflation is going to pick up, you will get yield reset every year. Yielding 6.3%. (Note: This doesn’t qualify for the dividend tax credit, so Buy it in an RRSP, RIIF or a TFSA account.)

This has been a good name in the past, and continues to be good. They have a decent footprint in Europe which is really helpful. Continues to post good numbers and will continue going higher.

A growth rollup strategy. They have grown a lot by acquisition as well as some organic growth. Trading at close to 50X earnings. It only needs to stumble a little in order to cause a great deal of disappointment. In order to continue the growth and the appreciation that we have seen, they have to continue to surprise people on the upside and continue on the growth pattern.

Essentially a serial acquirer of companies, which they roll into their product offering. Focused on smaller size companies. He bought this at $100 a share, and sold it last year at $629. It is going to become increasingly difficult for them to move the share price higher.

He likes them a lot. It is bullish when you see a company consolidate. They are forming another base or handle around $650. It would just take a large acquisition in order to move higher.

(A Top Pick Jan 29/16. Up 29%.) Focused in software and they have traditionally made acquisitions of smaller software companies. The challenge is that this is a $13 billion company, so they need to do 40-50 acquisitions yearly to really move the needle.

A fabulously run company. A great case study if you want to study how a company can grow through acquisition. When they started off, the idea was to buy companies between $5-$7 million. They focused on smaller companies, because in that way they were not competing with private equity. However, today the company is a $13 billion company, and they are still going after these small $5-$7 million companies. If it pulled back, he would consider buying it then.

We should see it fall back due to it getting to the end of the period of seasonality. He would put a stop in place. It was going down then the market is going up.

Recently added to his position as it broke through previous resistance in the high $500s. This has been the best performing stock on the TSX over the past 10 years. Their compound average growth rate of the stock price has been over 40% during those 10 years. Feels management are among the top 5 capital allocators in Canada. They feel there are more Canadian software companies that they could take over. Also, owns their debenture, and the interest rate is tied to inflation, so it is at 6.5% plus the trailing CPI.

(A Top Pick Jan 15/16. Up 17.36%.) This has been one of the greatest stocks in Canada over the last 10 years. They haven’t issued any more shares. Earnings have gone up tenfold. They’ve done great acquisitions. They have 100 people dedicated to acquisitions full-time in software.

(Market Call Minute.) You can’t bet against this company. One of these days they won’t find deals to do, but a very high quality company with lots of return on invested capital.