Constellation Software Inc. (CSU.TO)

This buys other software companies, and are now at the scale where they are really well diversified. Feels management is top in class if not the best management team in Canada. Excellent allocators of capital. They are in a whole slew of verticals. Very disciplined in terms of their acquisition strategies. Have just gone through a period of consolidation, and look to be set to head to new highs. Dividend yield of 0.89%

The CEO is right up there with the top capital allocators ever. He’s done a remarkable job of growing the company, and using free cash flow for making more and more software acquisitions. They essentially own companies that have a lot of service and annuity revenue. The free cash flow comes back into that office, and they go out and buy more. Too expensive for him. Thinks the big run is over.

He likes it. $400 model price, but they could do a lot of things to increase the model price, such as a stock split.

This has done extremely well. The 5-year chart shows a big range, and right now he is just neutral. The stock is not hanging around its highs. He suspects there will be some sellers coming in. It might have good support at around $380-$400, but then you have resistance from $500 and up with a very, very slight bearish bias.

Who do you like in Canadian Tech? As a value investor, he may like a Canadian Tech company, but may not be able to buy it because of its valuation. Two that stand out are Constellation Software (CSU-T) and CGI Group (GIB.A-T), and CGI is probably selling closer to reasonable multiples. Both are extremely well-managed. He also likes that they are both much more software dependent, not mixing any hardware which can be so fickle in today’s technology market.

Probably the best managed company in Canada. Strong on return on equity. One of his larger positions. Own it forever. There is still a lot of runway for them.

A well-run company and the CEO has created an unbelievable free cash flow machine, buying up software companies and having annuity revenues, and using the free cash to continue to buy more, etc. They now have a suite of thousands of companies and are on the hunt to buy more. This is on his radar screen, but he just can’t stomach buying it at this valuation.

(A Top Pick Feb 5/15. Up 41.69%.) Thinks they are shifting from a lot of little acquisitions to some really big ones that will come in once or twice a year. He continues to love this.

She likes this. Had gotten expensive last year. Their acquisition strategy has worked out really well. Acquisitions are now larger than what they used to be, but are not as frequent, so predictability is a little less. This is one that she would be picking away at on a really lousy day.

(Top Pick Mar 19/15, Down 0.74%) The sale worked out well and one of his stop losses kicked in and he sold. He is continuing to watch it before repurchasing.

This is a serial acquirer in the software space and have done fantastically well with that business model. It has had a great 10 year run. He is generally very cynical about serial acquirers, so didn’t go into this. Doesn’t feel he can know this name as well as he would like to, because it is hard to see what the true organic growth is when they are making acquisitions. He wouldn’t look at this at these levels.

The challenge is that the stock just keeps going up and it is very difficult to find an entry point. It is now down about 15% since January, and is at an entry point that many have waited for. Their core business is niche acquisition strategy, so they are acquiring small software companies. The average acquisition size is about $3 million, and they are focusing on a space that the bigger players are not interested in.

They do a lot of healthcare/government payroll sorts of things. They make organizations work more efficiently through software. This company is a huge acquirer. The founder still works at the company and has $500 million worth of stock. They don’t issue stock, the cash flow is great, balance sheet is really, really strong, they deliver on expectations, but they trade only in Canada and their earnings are in US$. They have had 11 days in a row where their earnings have gone up. Dividend yield of 1.06%.

Had been a long-term holder of this, but recently sold it when it broke down technically. This also has a lot to do with where we are in the market. Has been a fantastic performer, but doesn’t trade at a cheap multiple, so could be susceptible to lower prices.

(Market Call Minute.) This would be a Sell at this time, on valuation and a slowdown on deals.