Constellation Software Inc. (CSU.TO)

Has slid since the summer. Some investors are worried about AI threatening their business, and the CEO surprisingly resigned for health reasons. It's too early to answer the AI question. They have a lot of resources and are already using AI. Is one of the best Canadian companies and compounds capital well. At 19x earnings is a super entry point.

Is hurt by the CEO retiring and the fears of AI impacting their business. The won't change their hurdle rate when they buy future companies. Basically, CSU buys software businesses and won't change their approach. Will continue to execute well, even with a new CEO.

Wonderful business. Doesn't own because it's highly priced, even at this level. It would have to go down a bit more for him to buy. Any hiccup in the business and it'll go down more. But you never know what investors are going to do tomorrow.

Has done a great job of picking up other software companies, not worried about that part. A theme that will no doubt keep coming up in today's show is that it's all about price in this market today.

The chart is still struggling. He sold this last January as it lost relative strength. All tech software stocks have been struggling for several months and continue to. Next support is at $3,000, then $2,750. This is still bottoming.

Well managed, now has new CEO. Grows mainly through M&A, not organically, and it's been very successful. She prefers to see a balance of the two. Will AI affect demand for some of its products? A much larger company than 10 years ago, so growth through M&A requires much larger transactions.

There are other software companies, such as MSFT, with more of a recurring revenue stream and visible growth without having to do M&A.

Has performed well for so long. The CEO has stepped down for health reasons, so they can't buy companies at the same rate as before.  But it's a decentralized business where acquisitions take place in the business units themselves. Shares are attractive.

CEO leaves very big shoes to fill. Its vertical software model is at risk in this AI environment. It is possible to replicate what they've done, and he'd never have said this 5 years ago. Customers may be fully locked in, but there may be a loss of pricing power. 

He'll be trimming on strength. Be careful about investing in software as a whole.

Strong FCF, disciplined M&A. Global reach, proven long-term compounding. Wait-and-see on impact of AI. CEO departure also weighing on stock. Expansion beyond NA is positive. More upside to go. Will continue to be a leader. 

Trading below 50-day and 200-day MAs. For a patient investor, this dip could really add some value.

Software stocks in general have come off. His colleagues did a deep dive on this name and concluded that it's a little overvalued. May have a harder time in the AI environment. On a 5-year chart, can see lots of downside before it reaches some stability ~$2000. Watch the next couple of quarters.

With all its assorted companies, how does it leverage AI in a functional way? Software overall has been hit by this. From technical perspective, we've seen a breakdown. Little bounce recently, but still in a downward trend. Good support around $3600, and we're around there now. If it breaks below that, it's in trouble.

Software has taken a back seat to AI and there is a CEO issue so the price has declined over the past while. It is hard to get analyst coverage on Topicus as well as CSU. Also there is a lot more competition for growth stocks now. It has done very well over the years. 

These guys buy SaaS as their general business model. Some concerns in Silicon Valley and other places that AI is going to replace a lot of what SaaS can do. That could be a problem for a company like this one. It's been a great play for the past decade.

Going forward, there are some questions with AI that we need to have answered. Not sure that anyone has those answers yet. Stock trades at a pretty significant premium of 40x PE. High risk. Avoid at the moment.

Phenomenal compounder. It's really 6 companies in 6 different operating subsidiaries. Master of the small deal, and that's how it gets such attractive valuations. They buy things that other people don't know to buy. Really a private equity firm that focuses on software. 

If AI disproportionately affected 1 or 2 of its 1000 businesses, that wouldn't take down the ship. Very attractive multiple. Solid growth. High likelihood of multiple expansion. Yield is 0.14%.

Fantastic Canadian tech story. CEO stepped aside on health concerns. Stock was starting to get tired after digesting all those acquisitions, and the CEO announcement was the catalyst for selling.

Take a look at the chart. We didn't want long-term support ~$4400 broken, but it did and went to $3600. Top was $5200. The math works out: 5200-4400=800; and 4400-800=3600. He'd absolutely hold it today for the long term. Buy a bit today, and then be cautious on your remaining position -- see where it goes.

What's happening now is akin to everyone putting a pause on BRK.B when Buffett announced his retirement. Mark Leonard always said it was so important to have smarter people than he around him, and those smarter people are still there. He'd buy here. Chart shows support ~$3500; if it goes under that, something's going on.

Good wishes to Mark Leonard that everything works out well.