Sandvine Corp. (SVC.TO)

The problem with tech stocks is that you are almost as likely to go from $100 billion to $4 billion as you are from $4 billion to $100 billion. This one has a pretty good niche and has been around a while. It has been successful, but it doesn’t really have scale. The question is, will it ever get to be a big technology company.

The latest addition to his portfolio. He felt it was tremendously undervalued as a technology company. Management may have had credibility issues in the past. He is going to hold it for quite a while.

This has a relatively volatile chart pattern, but had an interesting little bottom last fall, a bit of a head and shoulders. It broke out and has been moving in a greater uptrend, but chart shows a lot of volatility. For a long term investor, if you are long the stock, he would stay with the story even though it is probably due for a pullback.

A nice little tech company in Waterloo. Have always had a good cash position. He would like to see them spend that. It is great to have cash, but if it’s on your balance sheet for a long period of time, it doesn’t really do that much for you. The concern about US problems on traffic on the Internet seems to be cleared up now. Doesn’t see this as having a huge growth rate.

He is concerned about the current quarter. He trimmed some of his position. They are in the middle of a big upgrade cycle from 1 Gig to 10 Gig. They have some exposure to new FCC laws that limit the ability of providers to throttle back some bandwidth to some. The company claims it is a neutral factor.

In the top 2% of his database. Net neutrality means the services they offer would not be required. The key is that it will take at least two years to get through US legislative bodies and people give little likelihood of this happening so this stock should continue to do well.

A top pick about a year ago. Operations have been doing well and earnings are strong. Buying back a lot of stock. Good visibility. Low multiple and good balance sheet. One of his larger tech holdings. Sees an acceleration in their revenue growth.

Really likes this company. Earnings have been very lumpy, so the stock runs up, gets hit, etc., etc. He really likes what they do, because they weaponize the biggest cable companies and Internet service providers, to help them discern what kind of traffic is going over their networks. This allows the Internet providers to bill accordingly. He thinks this is going higher.

Tech company, internet traffic control. Lots of regulatory concerns. They have a huge cash reserve and a competitor is up for sale. Rumours say they are looking at it. The valuation of the company is quite good as well. They have some trouble meeting their earnings estimates, however.

They are a leader by far and he thinks they will maintain it or grow it. This is the exact spot you should be in. One of their competitors is up for sale. He thinks there is a telecom spending cycle ahead of us. This will be one of the gems in your portfolio.

Deep packet inspection. They literally look at every packet that whizzes through the Internet, so they can figure out whether it is voice, video or data. This allows carriers to decide how much to charge clients. The industry is moving to a much faster delivery method from both 10 and 40 gig up to 100 gig. Have $162 million in cash. This is a free cash flow generator with a 5.5% free cash flow yield. 19% ROE is forecasted. Looks cheap at 7.5X enterprise value to forecast cash flow, which is expected to grow at 32%.

From a macro standpoint, we are approaching full employment. When that happens, companies have a decision to make. They can either bid up for new labour, (basically stealing it away from another company), or they can figure out ways to improve productivity, which means CapX. Feels that the CapX cycle, which has been very muted for this cycle, is going to increase and re-correct on the upside. This company is a leader in its industry, and benefiting from a weak Cdn$ and trading at 5.5X EBITDA. Their industry is growing at 15%-20% on a revenue basis.

Was a little disappointed in the last quarter’s earnings. There were a couple of contracts that they thought were going to be signed and do revenue in that quarter, but it didn’t come to fruition. However, right after that quarter they signed a deal for about $8 million, so the stock has moved up a little. Very cheap stock. Has about $1 a share in cash and is trading at around $2.80. Expects them to earn about $0.13-$0.14. If you exit the cash, it is only trading at around 12 or 13 times earnings. Strong balance sheet.

Has the unique ability to enable Internet service providers to know how their bandwidth is being used and create billing/service systems that meet demand and they are able to charge for. The decline since May is largely because of disappointing earnings in the last quarter. Thinks this is probably just a short-term stumble. He expects it to do well going forward.

Followed it a bit over the years. Small cap tech category. They have a fair bit of cash on their balance sheet, but have struggled a bit over the last few years. It is a bit below the market cap size he normally looks at.