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

This has been around a long time and has significant contracts. Most are for an average of 8 years. Companies continue to outsource their IT departments, which is what CGI’s specialty is. Trading at a 14X PE versus 2016 earnings estimates. Earnings are expected to grow at 11%, which gives a 1.2X PE 2 growth. (You typically look for something less than 1X.) The stock is efficient because they have a 13% return on a 19% ROE, but earnings growth forecast for 2017 is a modest 7%. If you own, consider taking some profits and look at the 3 Top Picks at the end of the show.

The dual class share structure means he would not be purchasing it. It has become a world class competitor. It is consistently well managed. Their acquisitions have rewarded investors well.

Within Tech he likes the services companies. They did a good job of the acquisitions they made. The stock has pulled back but not broken long term trends. Pick it up here.

A giant in its field, and has bought heavily into Europe. Brilliantly run. Doesn’t pay a dividend. He doesn’t think there is anything particularly wrong with this one.

A lot of money has gone into the tech space over the last few years. The dip to 52 week lows is a good buying opportunity if it is a stock you like. He thinks over the next few months you will see a lot of failed rallies. You want to buy only when it sells off aggressively.

(A Top Pick Oct 24/14. Up 23.49%.) Still one of his top 5 positions. He has the company at about 11X 2016 earnings. This company grows at 20% year after year. It is a great “buy and hold” stock. It is 20X 2016 cash earnings.

It has set back to technical support. It is not going up.

Technology services are a great theme in this market. They did a great job of growing their business in the US. See his Top Picks today for an IT services company. This one had a pullback and is in the right space to be in.

It has been a great performer. The growth has been very good. Last quarter some people found the numbers a disappointment. They are paying down debt and money is available for future acquisitions.

Has a pretty good feeling about this stock going forward. He didn’t like the set up going into this quarter as it seemed revenue growth was going to be light, and it was. Was surprised to see the stock off 5% on the news. There has been some negative overhang on the stock ever since the Computer Sciences deal wasn’t pursued. The stock is now going to grow based on fundamentals. Margin growth is best in class. It looks like bookings have been quite weak for the last few quarters, so he wants to see that start to pick up. Valuation is right if you are a long-term shareholder.

Half of this is outsourcing, longer-term contracts with recurring revenue stream. The other half is IT services and project-based things, and less long term in nature. Every few years, they do an acquisition and increases its presence in a vertical market or geographic market. About 55% of their revenue comes from Europe, about 30% from the US with the balance from Canada. Acquired Logical at the bottom a couple of years ago, integrated them and improved its margins. They are now ready to do another acquisition, but things are pricey so they are going to hold back. Does not pay a dividend, but is more of a growth stock. Attractively valued.

A technology stock that has been consolidating over the last 3 months. Has pulled back from about $55 to just below $50. It is sitting just above the rising 150 day moving average. He likes technology services. Doesn’t think there is a problem here.

(A Top Pick June 19/14. Up 33.24%.) A great company and one that he thinks will continue to perform well. ROE every year of 20%. It tends to trade all over the place, but a great long-term compounder that he expects will stay in his portfolio for some time. He is pretty comfortable that he will get to $90 on the stock.

A well managed company that has been growing by acquisition forever and he wonders what they are going to do for an encore from here. They have just gotten so big that they have to look for bigger and bigger acquisitions. He would take some money off the table and wait for the next acquisition.

Software and services company, half consulting and half outsourcing. The outsourcing part gives them a nice reoccurring revenue stream. In general this is a somewhat mature industry. This company is a very good operator and make strategic acquisitions every 2-3 years. They rolled off unprofitable operations and brought the margins back up to the corporate level. Have paid down debt and are ready to do another acquisition. A very attractive entry point.