Descartes (DSG.TO)

Has owned this for a long time. A low maintenance stock in his portfolio. It’s often hard to chase a stock when it is at its 52 week high. Likes their consistency. On day one of their quarter, they know what 90% of their revenues are going to be, so they spend the next 89 days getting that last 10%. A nice growth story. Tends to grow at 15% EBITDA annually. His philosophy on this is to Buy on the dips. A nice play on a global growth of trade, as well as the increased regulations taking place.

Has always been over capitalized. The old CEO has now stepped down and there is a new management team. Products were always great, but there is a little bit of change in the executive suite that might be a positive for them.

A global logistics software company, with high recurring revenue. Has been about half as volatile as compared to the market, with a five-year beta of 0.4. Also, has a low earnings variability that has an attractive rank of A-. Cash flow was up 13% year-over-year to 3.6%. Cash is about 12% of its overall market. Cash flow is forecast to grow at 16% for January for the 2000 (?) fiscal year and ranks in the top 10% of his Quant model.

CEO has stepped down, but the transition has been smooth. This is one of the most predictable stocks. On the 1^st day of a quarter, they know 90% of what their revenues are, so they spend the next 90 days working on the 10%. This is a stock that never disappoints because it is so predictable.

Tough to find an attractive entry point. Organic growth as well as tuck in acquisitions. Thinks eventually it could get taken out.

(Market Call Minute) New management, a roll up strategy. They have a very good multiple and he would want to see it pull back.

Had a great run. Grows at about 15% the year. He likes the recurring nature of its revenue which is at about 90%.

He shows an earnings estimate of $0.87 for the Jan 2015 year end. This gives a 17.5 PE with a crisp earnings forecasts of $0.59 growing to 87%. Market has great confidence that the 15% growth in EBITDA will continue. A free cash flow positive company at just under 4%, so that even though the stock looks pricey, 80% of their revenue comes from recurring revenue. It is an extremely sticky product for the customer base in the transportation space. As a result, you will see some very high enterprise value to EBITDA of 15 to 18 times on companies like this. Likes the company. Ranks in the top 5% of his database.

There is no reason to sell it unless it becomes overweight.

CEO is stepping down, but will still be involved in the business. An issue that he has always had with this company is their accounting. Somewhat opaque and they tend to use adjusted EBITDA, which tends to be a bit of a red flag for him. Likes the robustness of their business and the resilience of their customers. A play on international growing trade.

(A Top Pick June 4/12. Up 49.03%.) They are extremely good about taking earnings, ploughing them back and acquiring small companies that have interesting technology. Doesn’t own as he thinks there are multiple opportunities in smaller companies, to really go up but it’s not to downplay these Top Picks.

(A Top Pick Feb 3/12. Up 15.68%.)

(A Top Pick Feb 3/12. Up 5.43%.) Still thinks it is very attractive. Ranks in the top 5% of his ranking system. Has approximately a 6% free cash flow yield. Trading at roughly 13X price-earnings multiple. 85% of their revenue is recurring so odds are very high that they will continue to make money.

Announced a contract this morning. Works well with his current revenue model. Sold 3 weeks ago because it was under performing. He still likes it and it ranks well in his models but it has lagged on performance. Will watch when it next reports. Looking to buy it back over the next 2 to 4 weeks. He is looking for it to go up more than 5%.

Phenomenal job over last 5 years. One caveat is that growth is mostly through acquisition. Has had a nice run and is not as cheap as it once was, 14 times. Thinks we wont see a lot of growth over the next 12-24 months.