Open Text (OTEX.TO)

This has been a winner. They tend to do the rollup acquisition strategy very well. A lot of software companies have had a hard time migrating from the old license business, to the Cloud business, and this company has done that exceptionally well. They've broadened their product offering as well as their marketing scope. Has a lot of joint venture arrangements. Not that expensive, trading at 10 or 11 times operating cash flow.

After the last quarter, this came under a little pressure. The stock has a great, long term growth story. A lot of software companies have got a hard time migrating from the old “sell a license” to Cloud-based businesses where they have recurring revenue. This company has done it. Dividend yield of 1.6%. (Analysts’ price target is $40.)

This is in the enterprise software business. It is a consolidator, buying up competitors and companies such as itself, and growing their earnings. Their latest quarter was only so-so, and the market has taken it out on them and driven the stock down to what he thinks are bargain levels. Dividend yield of 1.7%. (Analysts’ price target is $40.)

In recent years, this has been a bit of a consolidator in the industry, and has some very strong niches. He doesn’t own this, but is something he would look at.

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.