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

This is going to continue to be a beneficiary of capital flows. It has a fairly decent revenue stream coming in from outside of Canada. Also, it is in a small group that is a unique part of the Canadian marketplace, which is not financials or commodities. Fits his view of a low volatile investment.

The trend is up. 2014 showed bullish congestion and then it broke out again. He likes the looks of this. When this stock goes against the market it has outperformed it.

Margins were high last quarter, and he expects them to remain high. Good cost controls. He is seeing growth in cloud-based services, and are doing a good job in transitioning contracts to higher value services. Thinks the whole IG industry can grow from industry consolidation. They are very well positioned to that. Very good balance sheet and free cash flow, and a lot of that free cash flow they can use towards shareholder friendly initiatives. He would accumulate this on weakness.

(Top Pick Nov 17’14, Up 30.44%) A long term holding for him. An incredibly well run business. Cash flow continues to rise. People are looking for what acquisition they do next. It offers good value, is at a discount to the group and he wants to still own the name.

Computer services. Half their business is outsourcing, so there is a nice recurring revenue stream as it tends to be long-term contracts. The other half is systems integration consulting, where they go in and do project work. About 55% of their revenues come from Europe on the back of the Logica acquisition they did in 2012. Another 30% comes from the US, and the balance from Canada. The Logica margins were quite low and it was not well run. They rolled off nonperforming contracts and have gotten their margins back up close to the corporate average. With this now integrated in, they are in a position to make another acquisition to expand their geographic presence or their vertical market presence. This company tends to do that every 3-4 years after they have integrated the company. There was kind of a lull in some of their government contract signing last year and that is starting to pick up. Very well-run and attractively valued.

A Montréal-based company and have done an amazing job. A dual class share company, and he doesn’t buy dual class share companies, but has to give them a lot of credit. Have done an outstanding job growing by acquisition, generating free cash flow and revenue growth. Not a cheap company but a really well run business.

Relatively low multiple. Their customers sell into health care, financials, and government. They are making themselves into a facilitator in the move to cloud services. They have been doing accretive acquisitions.

Likes this name and owns a little. Doesn’t see a reason why you shouldn’t continue to own it. The real benefit for the stock is the ability to continue to see the European growth expand for them, particularly seeing that Europe has turned the corner. Looks attractive and the fundamentals look very good.

(A Top Pick Dec 10/14. Up 38.77%.) Still likes this. They are a massive global company. Hasn’t seen much from an acquisition standpoint for some time, and wouldn’t be surprised if we start to see them make a few more acquisitions with a ramp up in their organic growth. He still likes this at this price.

Really strong operators. Outsourcing technology is about half their revenue, so you get a very nice recurring revenue. The other half is systems integration and project management. While the IT service space is relatively mature and the growth rate is not that high, they are very good at making acquisitions every few years, and integrating them to increase their presence in a particular vertical market or geography. Acquired Logica in Europe a couple of years ago which really expanded their presence in Europe, and is over 50% of their revenues now. While they have made a lot of progress, there is still organic upside. Paid off the debt that they had for the Logica acquisition. In position now to make another acquisition, but management is very disciplined in not overpaying. They are seeing a pickup in their US federal government business.

This has been a laggard, but it has had to play catch-up. The valuation had a tremendous move prior to the last year, so it needed to back and fill a bit. There were some worries about their ability to sustain the growth going forward. It has been a bit of an acquisition driven model. However, it has been a good winner over the past number of years and he likes the story and the valuation. He also likes the growth in Europe. The US federal government is half of their US revenue, and that is probably 30% of their total revenue. It looks like that spending is starting to pick up again, which could be a positive for them.

He would like to see it get a little cheaper, but if you are looking out 2 or 3 years, this is a great long-term story.

(Market Call Minute) Likes it. He would still be buying it.

Probably a little bit of headwind from a couple of things. Currency is one they are facing as well as their competitors showing slower numbers. However, the multiple is really compressed and there is always an acquisition premium that they have. If you are patient, you could probably be looking at this now.

(Top Pick Nov 17/14, Up 16.02%) Had a rougher ride this year. There is a lot of concern on currency and margins plus organic growth. He figures they are due for a good size acquisition.