Open Text (OTEX.TO)

A good company and business model, fundamentally 8/10. Be cautious on valuation, wait for a healthier pullback. Risk/reward isn't there right now. Likes it in the long run. 

He bought then sold it (though missed the peak). Wants to rebuy it. They like their latest acquisition, and they grow by buying, not organically. They migrated well from licensing to cloud services, which will raise their PE over time. Trades at a great 12x PE.

OTEX reported a net loss of US$48.7 million in its fourth quarter, down from earnings of $102.2 million last year. This was attributed to acquisition expenses. Revenue of $1.5 billion rose 66.2% year-over-year marginally beating estimates. Annual recurring revenue of $1.2 billion rose 56.4% year-over-year, and cloud revenues of $452 million were up 9.7% year-over-year. Quarterly enterprise cloud bookings rose 12.3% to $164 million. Adjusted EBITDA came in at $463 million, reflecting a margin of 31.0%. The company also announced opentext.ai, a strategic approach to advance how customers can apply artificial intelligence with OpenText software. Management guided the MCRO acquisition to return to organic growth in FY2024, earlier than expected. We think it is still some time to see valuation recovery for OTEX. We would consider anything under $48 to be a reasonable entry point. 
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He targets $62.25. He likes and follows it, but they bought Micro Focus for$6 billion, half their market cap. So if they can integrate that quickly. It would make them more competitive. Buy at $48, then at $45 in tranches. Too expensive now.

It has been cheap for a long time since it hasn't shown growth. It is growing now at 22% and is trading at 8X. Has an imperfect balance sheet.

Tech company based in Canada.
Very high debt levels.
Not a good time to buy shares. 
Better names in tech sector. 

Global, site-based and cloud-based. Installed base of 150M+ users. No customer concentration risk. 80% of revenues are recurring. Sluggish organic grower, but very capable serial acquirer. Just closed most skeptical acquisition, seems to be going well. Shareholder return over 20 years of 13.4%, 10x the TSX tech index. Deeply discounted at 9x earnings vs. its 10-year average of 13x. Yield is 2.38%.

Not expensive at 9x earnings, huge free cashflow. Growth by acquisition story. Strong revenue growth, but not mirrored in free cashflow growth. Buying it won't hurt you, but he prefers something like MSFT. Yield is 2.3%.

Has recently added position.
Prospects for business positive.
Recent M&A very good for business.
Believes further upside at current share price. 
Lots of recurring revenue. 

It performs when the market is volatile or frothy. Interesting. It bottomed in mid-2022 around $36 and topped in mid-2021 around $72. They gobble a lot of companies. Fine organic growth. Good to buy today.

Does not own shares. Follows closely.
Wait for shares to fall before buying.
Has seen shares really YTD.
Tech sector should expect further recoveries, but expect volatility. 
US Fed rate hikes will affect company (not much upside).

Driven by acquisitions. ROIC has fallen. Better opportunities for new capital in Canadian tech such as CSU or TOI. Good, but not exceptional. If you already hold, hang on.