Constellation Software Inc. (CSU.TO)

A strong balance sheet, but the gap is increasing between its share price and fair market value in recent years. Has nice support at $3,900, which is safe.

It is a great company with a great track record and solid future. It has spun off other companies. The bigger it gets, the more complex it is to acquire small companies and absorb them, but it is doing well at it.

Performed very well, an outlier to most Canadian tech. Chart moves up, consolidates, and now it's legged up. Will probably consolidate, growth won't be the same as in past year or so. Over time, will continue to be a solid name. See his Past Top Picks.

The TSX darling. They buy software companies regularly and merged them vertically. Their only challenge is that as the company grows, so must their acquisitions--and they must continue to be accretive. Loves this. Will keep buying shares.

Will continue to own shares. Very strong business. Capital allocation skills very high within management team. Vertical integration of software business is proving very profitable. In reality, private equity company that acquires software companies. Very strong business model. Recurring revenue with mission critical functions (customers need it). 

Trading in a sideways range between $3900 and support around $3550. He likes to see this consolidation, especially if it hasn't gone down or broken down, as it suggests very solid accumulation underneath. 

$4000 is a big round number, could present significant resistance. If it went through, that would be a breakout, and measuring $400 from the channel would suggest the next resistance would be around $4400.

CSU is a “one of a kind” software company as the company did not pump up its AI theme compared to other Saas businesses. CSU grew through small acquisitions, while most public Saas grew by acquiring customers through marketing spending. CSU has no stock-based comp (SBC), while most large public SAAs have a large SBC as a component of their cost structure. CSU is unique, and what determines the share price performance is fundamentals. AI could make CSU’s offerings become more efficient, adding value to its customers, and therefore, making price increases easier, but it has never been the core selling point of this vertical market software.
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Makes small acquisitions, doesn't overpay, cautious with the balance sheet. Lots of great opportunities going forward. He likes the up-and-to-the-right businesses.

Grows at 20% a year. Hints that the next spinoff will be its transportation group. With each spinoff, most of the cashflow and earnings stream back up to the parent. Thinks stock will be worth 20% more a year from now.

Great growth story cutting through all the noise. We want to see it get through where it is right now. May pause and come back a bit. Expects markets to be a bit soft for the next few weeks. Fantastic business model, nicely growing. If it breaks above its early January high, which it's trying to do right now, look to add.

Tongue in cheek, he estimates that in 5 years, price will double from today; in 10 years, quadruple. That's based on 15% compounding every year; at that rate, your investment doubles every 5 years. He doesn't actually set price targets. His largest holding at 15%.

Must look at fundamentals of the business. For CSU, haven't changed; in fact, have gotten stronger. Deploys increasingly large amounts of capital, disciplined in looking for high rates of return before acquiring. Founder-run, founder-owned. High margins. Not much debt. High and consistent ROIC. Well run.

12-month price target of $3980. Poster child for Canadian tech. He'd still buy 1/3 here around $3740. Buy another 1/3 if you see it around $3550, and the final 1/3 at $3325. So well managed. All about vertical integration, a great way to expand. He has a full position at 4.5%.

Great-looking profile. Uptrend since 2022, got overbought, now pulling back. Healthy right here. If you own it, hold, and look to buy more.

With some companies, you wait for a pullback to enter but it never comes. On his radar. Small change in strategy, looking at larger deals. Great capital allocators. The spinouts can continue the work of the smaller deals. 

Owns shares in company - longtime owner. Excellent company with history of compounding capital at strong rate. Largest software company in Canada (private). Vertical market software (niche business use) roll up strategy has proven very fruitful. Recurring revenue excellent for bottom line. On track for continued growth. Owner/operator mindset very good for investors. Company can be compared to a private equity company that specialized in software.