CGI Group (A) (GIB.A.TO)

He really likes the tech space, and tech services which this company is in. The stock has been acting well and he would like to see it trade through $67 and $68. At this price, it looks quite attractive.

A large IT services company. Half their revenues come from outsourcing from long-term contracts. The other half is systems integration and projects. A very well-run company and very global. Half their revenues come from Europe, an acquisition they did in 2012, which had very low margins. CGI improved those margins back to company levels. About 20% is from the US, 50% from Canada, and the rest from Asia. Every few years, they tend to make a large acquisition to expand their geographic scope or a particular vertical they want to be in. (Analysts’ price target is $74.)

Chart shows this is moving sideways. He would need it to break out of its pattern before he would be remotely interested, and would prefer to buy it higher. If it doesn’t break $65-$66 meaningfully, he expects it will move back down to the bottom of its trading channel. It doesn’t interest him.

This has grown both organically and by acquisition. They have really taken advantage of the trend to outsource computer systems, programming, etc. This has always traded at multiples that have not been appealing to him as a value investor. If you own, it never hurts to take a profit.

They are a consolidator. It is one of Canada’s few successful tech companies. Over 5 years you have not done badly. Stick with it.

This space has been sideways for some time. He uses his cues from the technical side of things, and if a stock in a sector is not really moving forward with a lot of the other names, particularly south of the border, then you want to look south of the border for names.

Has kept a close eye on this and has a lot of respect for it. A growth company and has never paid a dividend. The new CEO has been there for about a year and the balance sheet has been substantially deleveraged. It has been about 5 years since the last major acquisition. Generally, they create value when they make acquisitions, and the new CEO is probably going to want to put his stamp on the company. The company has decent organic growth. Not overpriced.

(A Top Pick Nov 25/16. Down 3.73%.) This has been stuck in the mud, which has been frustrating because technology has done phenomenally well. It was the right space, but the wrong pick. Technology tends to do well between October and January. This one has just been stuck in a consolidation range.

Growing rapidly. 55% of revenues are from Europe. It has shown very, very good low volatility nature over the years. Probably something that you want to own. He’s always preferred looking at an Open Text (OTEX-T), Constellation Software (CSU-T) or in the IT area.

One of the best companies in Canada, and one of the better operators. A tremendous running machine. They conduct more than 10,000 interviews with their clients, current and prospective, to establish trends of what is happening and what clients are expecting. Feels the business will continue to grow, especially in the US, both in government and on the commercial side. They will continue seeing great results on ROE and free cash flow generation. This is one you should buy and hold for the longer-term.

(A Top Pick Feb 16/16. Up 13.14%.) This just continues to grow. Single digit organic growth, but they’ve added well with acquisitions. New management is talking about a lot more opportunities going forward and being able to derive higher margins. Somewhat expensive at these levels, but he still likes it.

Computer consulting and services provider. Consulting is a big growth area. He likes this one in particular because they are exiting a lot of their lower margin contracts, so he expects a margin improvement over the next several months. They have been on the acquisition trail. (Analysts’ price target is $70.32.)

The long term trend is pretty good, but in the last year it has been pretty flat. He would not be too worried about it until the long term trend is broken. (Analysts target: $70). You want to trim near $70.

Half their business is outsourcing and the other half is consulting. The outsourcing part is long-term contracts with a nice recurring revenue stream. Their last acquisition was Logitech a few years ago, so their exposure to Europe is quite high. They are in a position to make another acquisition to grow a vertical market or geographically, and she thinks their preference is in the US. They are quite stringent on guidelines as to how much they are going to pay. Meanwhile they are actually seen some nice organic growth in the financial vertical. That industry is experiencing new competition in terms of new FinTech start-up companies, which is stirring the incumbents to increase productivity, cut costs and outsource, which all benefits CGI. On the whole digital arena, they provide fibre safe security. (Analysts’ price target is $70.55.)

Canada’s leading outsourcer and IT services company. They got a new CEO in October. A great track record of growing. Organic growth is somewhat tepid, so the company has a history of being a “growth by acquisition” story. This gets a limited trading multiple relative to some of the other more dynamic growth stories in the technology space. Their last large deal was done in 2012, which was a game changer, and was massively accretive to earnings. The company has now almost fully deleveraged their balance sheet, so looks like they are ready to go again. A good, backdoor way to play the rest of the world.