Open Text (OTEX.TO)

Recently bought this. Had been looking at names that were unduly hurt or had not participated in this big rally, and this one was a screaming opportunity. Had some struggles lately, as the market is trying to digest its recent acquisitions. They have a bit of a tax issue with respect to the US. A good fundamental company with a reasonable amount of earnings. Their acquisition makes sense and will allow them to continue to grow.

A Canadian success story. They’ve done a great job of increasing shareholder wealth over the long-term. It meets his criteria of being a high ROE generator, and have done it for an extended period of time. They’re off their 52-week high, so this would be a reasonable level to initiate or add to a position.

TSX Infotech sector? He would look at this and CGI Group (GIB.A-T). This one has 3 main verticals. Perhaps a little bit of a challenge is that the CEO has done a few too many acquisitions, too quickly, back to back. Pays a dividend. This has performed really well and has sold off fairly recently. A fairly decent entry point here.

For 3 to 5 years it will probably be okay. It is European originated where there is better growth. He thinks they should be doing better. Given where it is now it is a hold. He owns US techs.

He likes the company. It gets a lower valuation because a lot of them have been taken out. OTEX-T is one of the last ones left in the space. Their acquisition record has been phenomenal. They have a good balance sheet and a good risk profile. As they grow the market multiple should grow. Their track record of earnings had problems in the past.

Competes with IBM on business management software. Artificial Intelligence, data mining and cyber security come into the picture. It is a cheap stock at a price that is worth getting into. They are becoming a game changer. (Analysts’ target: $40.00).

A Software stock that he has owned for some time. They are a consolidator, merging in companies and taking their costs out. It was a buying opportunity when they slipped off after a bad quarter.

Open Text (OTEX-T) or CGI Group (GIB.A-T)? These are in different businesses. The New CEO on this has to pay more for acquisitions because they are bigger, which is needed to move the needle. Because of this, the company now carries more debt. They have a dividend, which CGI does not. He likes the company here, but if you can get it a little lower it would be alright. Periodically this stumbles, and you can pick it up.

The stock has fallen. They made some acquisitions, and feels the market is concerned that the steady progression of cash might not quite be as steady as they go through the digestion of these acquisitions. He likes that they can grow and that it trades at a multiple of earnings, not a multiple of cash flow, revenues, etc. Likes the stability and the growth by acquisition. Dividend yield of 1.5%. (Analysts’ price target is $40.)

Historically, this is a volatile stock, and its earnings seem to be lumpy. It closed at $40.54, and he has a model price of $54.49, a 37% upside. A perfect example of a trader. If you are a trader, you take your gains and look elsewhere.

When he sees a stock drop 10%, he wonders if he’s on the right track. Things are still lining up for this. His indicators are right at the 0 line so he is expecting it to turn up. Has not sold any of his holdings. If you don’t see this participating in the next few weeks, there might be better places to put your money, but he thinks a long-term trend of the stock is still really good.

This is one he generally likes. It typically goes through a cycle where they miss on an earnings report. It hasn’t been caught up as much in this growth FANG thing. Valuation has been hurt a little by recent misses. Trading around 35X earnings and at 8.5X ROE and 16X EV to EBITDA.

Their acquisitions are going to take some time to consolidate and chew on, to get the synergies out and start moving the company forward again. He likes their business model. This is probably presenting an opportunity, but at the same time, that flow of funds has really gone out of resource stocks in Canada, and into anything but. He would be cautious and continue to watch it from here.

He likes the name and the sector a lot. Technology is one, if not the best performing sector this year. It has really been strong. Tech is typically an early cycle mover, so once global growth picks up, tech is where you want to go. This company has done really well and continues to do so.

One of the largest Canadian software companies which has a combination of some organic growth along with a consolidation play. Very well-run. The stock has done extremely well, and is probably going to be in a sideways pattern for a while.