Andrey OmelchakLumine GroupLMN.VTOP PICKSep 10, 2024

Falls into the same software as CSU and TOI. Pendulum swings between hardware and software, and obviously right now it's over at hardware. Software will take a while to get back, and upcoming earnings from a couple of companies could lift all boats.

Selloff in SaaS is very much overdone. AI won't disrupt its business model; in fact, the least exposed to AI disruption because it's so vertically integrated. Actively implementing AI across the company. Company expects margin improvement from recent acquisition.

They still make acquisitions of software that is difficult for consumers to replace. This will do well going forward.

Has never owned the parent company, Constellation Software, or these. All software stocks face negative sentiment from AI fears. These keep going lower. It all comes down to sentiment, but valuations have fallen and are ridiculously cheap. He agrees with other investors that these have been oversold. The fundamentals are still there. AI will not replace software, but when we hit a bottom, you're guess is as good as mine.

Tremendous buying opportunity at these levels. Sold off along with the other vertical software businesses due to AI threats. In reality, LMN has a very sticky business. It takes years to develop relationships with customers and apply software to address all the special cases, which can't be displaced by a single AI solution. As well, it can use AI to improve its offerings at a fraction of the cost.

Just made a highly accretive acquisition. Exceptional capital allocation at very high rates of return (for him, that's 20-25% or more). He thinks the market has it wrong.

Deals in vertical market software, focusing on media and communications. They don't do small deals, but larger buys of companies, carve-outs of a large company. But they haven't bought a company in a while, and this stock moves up on deals. Trades around 20x PE, lower than just 6 months ago.

LMN has been hit largely with concerns that AI is going to negatively impact the software sector. We have some comments posted, and there is a blog on the topic in our blog section. There is some risk here, but also potential. We think at the new price it remains attractive for long term investors.
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Likes it a lot. AI will benefit vertical market software companies and hurt only those companies doming something simple on the surface. The market has it wrong about AI and software. Lumine will see margins expand, and has many opportunities to buy companies. In the past year, they made a buy purchase and increased margins in a short period of time.

Prefers to stick with the parent company, Constellation Software, but LMN is fine. AI will be fine for software companies like this.

Encompasses 20 companies, software geared to media and communications. 12-month price target of $56. Don't buy here. If you own it, sell come short-dated calls around $55-60.

TOI would be his choice, mainly based on geography in Europe (which is still expressing value) and its runway is a bit better. The strings for both are actually being pulled by the parent CSU.

Always start with the big picture chart (3 years at least), and then move down. This 3-year chart is in an uptrend, so now we can go back to the YTD chart. Broke out of its base, but has pulled back from the uptrend. Don't want to see it break the previous low, and we're there today. 

If it bounces up, that's good.

Slowdown in M&A on this name, so it's lagging both CSU and TOI. And that's why he chose it this time around. As soon as the M&A picks up, stock should rerate higher. High quality. No dividend.

(Analysts’ price target is $52.67)

Acquisition integrated extremely well. Has proven whole business model. One of the bests compounders in Canada. Increasing opportunities to deploy capital. Expecting another acquisition this year. Very strong buy at these levels.

Ideal would be to own the whole ecosystem of LMN, TOI, and CSU. But LMN is the most exciting one today.

It is a spin-off from CSU. It specializes in carve-outs and the advantage is that the selling company is not necessarily looking for the highest price. It has run up a lot so the evaluation is quite rich.