CGI Group (A) (GIB.A-T)

Global operations; with Canada representing ~15% of revenue, US ~30%, 44-45% in Europe and UK. Outsourcing (~55% of the business) has long-term contracts, so that's defensive and not as cyclical. Consulting side tends to be more economically sensitive. Stock's pulled back ~17% from highs in February. 

About 14% of revenue is from doing business with the US government. Risk from DOGE cuts, but CGI's contracts are for mission-critical services. Near-term business uncertainty may result in a softer backlog. But long term, IT services are essential to decrease costs and increase productivity. Increasing M&A activity. Trades around 17x PE. Strong balance sheet. Yield is 0.42%.

Labour intensive. Pullback from economic uncertainty. Wonderful business. Very reasonable valuation. He'd continue to buy.

DOGE has put the chill on companies with US government contracts. Stock's possibly fallen too much, as the company provides critical services. One of the best-run companies in Canada. Getting attractive. Before you buy, research how much US exposure it has. Long-term thesis is that everyone is looking to implement AI.

He'd like to have more clarity on government contracts, but this is why there are risks and rewards in investing.

He can't explain the big drop today, but a 6% drop in this name is unusual. Chart shows what a good company it is. Operates in Canada, US, Europe, and India. Should be advantaged by near-shoring. Lots of US government customers, and that should play well with Trump 2.0.

Stable grower, well managed. Drawdown is probably a buyable opportunity.

Corporate budgets under pressure has dampened spending. Backlog has remained very strong. Hasn't grown as strongly as some peers. Sitting just above his buy price at north of 20x; for new $$, wait for a better valuation.

In its annual report, GIB.A disclosed the degree of client concentration, the company’s revenue with the U.S. federal government consisting of various agencies accounted for around 13.5% of GIB.A’s total revenue in FY2023.

The U.S. government is one of the largest customers of GIB.A. That being said, so far, DOGE is mostly just noise. Of course, there is always a risk when doing business with the government especially when companies raise prices with the government too much. We don’t think GIB.A is the target of that program, there are lots of other niches that demonstrate price-gouging behaviour rather than IT services.

Even in the worst-case scenario, if GIB.A is limited in terms of raising its capabilities with the government; we think the company can still do just fine if the other 87% of its revenue sources keep doing well.
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It's hoping to win more contracts as well as benefit from AI. Every single company is trying to implement AI into their products. Slow-growing business, more acquisition-based. Hasn't knocked it out of the park. A quite reasonable valuation. Actively looking at, would love to buy on a material pullback.

Attractive entry point. Defensive and recurring revenue stream, as contracts tend to be quite long-term. Half IT outsourcing, and half consulting. Consulting has slowed due to macro uncertainty, but some of that's probably stabilized and we should start seeing growth. No dividend.

HQ in Montreal, but Canada accounts for only 15-20% of its business. US and UK each account for about 1/3. Very global. Very disciplined acquirers. Balance sheet strong, generates free cashflow. Organic growth should start to improve, and so M&A will swing to the upside as well.

Relatively low organic growth. Relies on making acquisitions to grow, and they've been successful. His choice is CSU, but you'll be OK in GIB.A.

A long-term hold of his. Has done very well for him. A leader in global IT consulting. Are focusing on AI now. Are successful in buying and integrating companies around the world. The stock is no longer expensive. Margins are improving; managed services offer recurring revenues. Decent valuation and growth ahead. They will start paying a dividend.

Well-positioned for digital trends in the space. Wouldn't buy today, as valuation is above his buy price. No problems owning.

3/10 on value, not too attractive. Super-volatile stock. Fundamentally, 9/10. Employees are in 400 offices across 40 countries. AI boom isn't going anywhere. Valuation stretched, upside potential of 6%. Wait to see how the tech play is going before entering. Good long-term hold.

More-or-less recession proof due to long-term contracts. Government contracts wax and wane over time, but CGI is a major player. Stock's not cheap. If it got cheaper, he'd happily look at it. Spectacular management for 25 years. Great company.

One of the largest IT companies in the world. Helps clients figure out business strategy and execution. IT services and consulting is about 55% of revenues, systems integration at 45%. US revenue represents 30% of the total, Canada only 15%, rest from Europe. Long-term, recurring revenue contracts. 

$1B investment in AI over next 3 years. Well run, well-regarded management team. Profitability considerably above that of market average. Strong balance sheet. Trades at 17x PE. No dividend.

Doesn't own any of the consultants, because they're trying to find their place in AI. Has been left behind.