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

This has done well. A very consistent company. They have very long-term contracts with companies that want to outsource their server farms and other capabilities on the computer side. As a result, this company has roughly 7-9 years’ contracts of a lot of money in advance. Extremely good visibility. Year-over-year sales growth has been fairly modest. About a 5% lift in earnings. Extremely disciplined in their acquisitions, so he expects the stock will mark time for the moment, waiting for another significant acquisition opportunity.

(A Top Pick Jan 12/16. Up 17.96%.) A systems integration and outsourcing firm, about half and half. The outsourcing portion is very stable with a recurring revenue stream. They grow organically, but do make big acquisitions every few years. Their 2012 Logica acquisition really expanded their geography into Europe. It was a very low margin business when they bought it, and those are now almost back up to their corporate level. They are ready to make another acquisition, but management is very disciplined on how much they are going to pay for the returns that they want. They are seeing pretty strong demand from their financial verticals because of increasing competition, and FINTECH because a lot of financial institutions are trying to improve their legacy systems through productivity and client servicing. There are also opportunities in cyber security in digital commerce, which they provide.

Not cheap, trading ahead of its 5-year average. Also, doesn’t have a dividend, but has a lot of growth. They are transitioning maturing contracts to higher end solutions. Growing from their IP 30 digital solutions and from new outsourcing contracts i.e. the city of Edinburgh. Q3 was largely in line. A very rich backlog. Margins are strong. Strong free cash flow. He sees growth at about 8% EPS over the next couple of years. A pretty fragmented space, so there is a lot of upside from acquisitions.

Has a nice upward trend on technicals, but is very volatile. You really have to catch this in one of their down swings. A difficult company to analyse because it is sort of like an advertising agency, i.e. it’s mental talent in there that is doing it. Have done an excellent job and got all sorts of contracts. Big in Europe. Wait until it sells off before stepping in. Trading at almost 17X forward earnings.

One of the larger Canadian tech companies. If Donald Trump is going to make America great again, you would assume IT services would follow suit as well. Between Nov 27 and Feb 8 it has gained about 20.25%. A very positive backdrop. The trend is higher highs and higher lows, and has not shown any signs of fading. If you can buy it closer to support, now is a favourable time to get in. We have seen a bit of a neutral performance. It has not outperformed the market, but it has outperformed the technology sector. (Analysts’ price target is $71.11.)

This is legitimately still a buy. It is a great Canadian growth story. It has limited organic growth prospects but is a serial acquirer. It has been about 4 years since their last transformational deal. They deleveraged since then. You can sleep well at night with this one.

Has some pretty good growth. This company can grow by acquisition. It is still a very fragmented space. He expects there will be consolidation, and this will really benefit from that. He is modelling a 4.5% EPS for 2016-2018. However, it is trading ahead of its five-year at around 18X. On a pullback, you can buy this name.

Cognizant (CTSH-Q) or CGI Group (GIB.A-T)? This is in IT consulting to financial institutions and other big organizations. Both are growing at about the same rate, about 10%. When looking at the multiple they are trading at, they are virtually the same, 15 or 16 times next year’s earnings. This company is in Canada and the US. Of the 2, he would prefer this one as the stock is behaving much better and the price performance is much stronger. He prefers Fiserv (FISV-Q) and Fidelity (FIS-N), which are both specifically in financial technology, which is the right space as digital transactions are growing 10% every year. Banks have held back on spending on technology over many years, and are now re-accelerating their spend.

This has bothered him a little in the last few days. Usually, on a seasonal basis, this stock does very well along with other technology stocks, from around the 1^st week in October right through until at least the 1^st week in January. What concerns him is that the stock is not acting the way it should be. It broke a support level last week. The stock would normally continue moving higher at this time of year, but it has stalled. There are better opportunities within the high Tech sector.

(Top Pick Nov 25/16, Up 7.01%) Nice reoccurring revenue stream. Their last acquisition was in 2012 and they have improved the already attractive margins of that one. They are now ready for another acquisition for expansion. They say they just have not seen the right deal yet. They don’t pay a dividend. They would rather buy back their stock or grow their business. They have done well in terms of share price appreciation.

One of the problems is that it is very hard to analyse. They are in the Information Technology business. Very diversified internationally. The chart is great. It is quite volatile. There is no dividend, so it is purely a growth stock. They seem to do a good job and have some good contracts. If you are feeling aggressive and like the long-term prospects, you could take a part, but wouldn’t make it a large part of your portfolio.

IT services and outsourcing. About half is outsourcing, so there is that recurring revenue stream, so their earnings revenue is less volatile. Every 3-4 years, they tend to do a major acquisition, either to increase their position in a vertical or geographically. They are ready to do the next acquisition, but are very disciplined in what they buy. In the meantime, they are seeing a pickup in their financial services vertical within North America financials as well as in Europe. This has been a function of the fintech and increased competition from non-bank traditional players, so traditional players are now looking to increase their productivity, get better customer feedback and are turning to this company to improve their legacy system. They also have a lot of offshore employees that contribute to the productivity increases.

Trading at its all-time highs. Solid price momentum and good valuation. They have been a consistent grower by acquisition. Good ROE’s at around 18%. No yield; it is a growth story.

They are on the consulting side in how to make businesses better, and are able to do that all throughout the execution. A great play for the underlying trends of technology implementation.

(Market Call Minute.) Just reported organic growth coming back in the last quarter and the market loves it.