Jordan ZinbergTopicus.Com Inc.TOI.VPAST TOP PICKMay 05, 2025

AI has had no impact on software demand. As a business owner who uses software, there's no way he switching to AI.

Fantastic business. HR and payment systems for small businesses, mainly in Europe. Growing way faster than CSU. Now half the price it was last year. These companies will pivot quickly to integrating AI.

Exited in favour of LMN.

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.

(Timeframe not quite a year.)  Victim of attack on vertical market software. In reality, business is doing really well. Deployed $835M last year. Pressure on the business is overdone. Generates 6+% FCF yield if you look at next year. Tremendous upside. Organic growth rate is OK. 

Was spun-out from Constellation Software, which he owns. He sold TOI to buy more Constellation, which owns large stakes of TOI anyway. He wanted to keep things simple. His kids own TOI, which trades at $120 vs. $3,300 for Constellation, so TOI is more accessible to investors. Also, it's easier to grow the smaller TOI than Constellation through acquisitions. Both are great businesses to own. Shares of both are down a lot now on fears that AI will replace software. (He doesn't know either way.)

He's held this since the spinoff, but hasn't added to it. He tends to focus more on CSU, as it's larger-cap with more liquidity. Likes them both. Until AI monetization gets more fleshed out, hard to assess its impact.

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.

When you see the PE ratio of 100x, it's really around 50x (based on proprietary metric of FCF available to shareholders, or "owner earnings"), but still expensive. To get mid-high teens rate of return, you want to pay around 20-25x cash earnings. CSU still owns 50%.

He'd prefer CSU, though you won't go wrong with TOI. If your heart's set on TOI, you want to get it cheaper.

Does the same thing as CSU, but focusing on European markets. Nice 5% organic growth rate, which is very good. Deployed a lot of capital this year at really good rates of return. One of the most exciting compounders in Canada. Can hold for an extended period of time, as in 15-20 years. No dividend.

Following same playbook as CSU. A true compounder. No end to the companies it can acquire, now looking beyond Europe.

As a spin-off of Constellation Software. It has the same business model as CSU, only its focus is on the European SaaS market. It is growing well and its valuation is similar to CSU.

The slowdown in TOI's acquisition pace and revenue growth is concerning for sure, given that a lot of optimism has been priced into the share price due to its involvement with CSU. That being said, one year does not make a trend, and historically, CSU also experienced a similar situation in one year where the company’s growth was only 10% (FY2015) and a few years of around 13% (FY2019 and FY2020). Companies are run by people, not machines, over the next ten years, there will be great years, bad years, and so-so years. We would remain bullish on TOI but, at the same time, we would be open enough to change our minds if the operating results do not improve over time.
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It follows the Constellation Software model. It is European focussed which is perceived to be a problem and North America is more in favour at the moment. However it could spin the European situation into a positive situation. Their accretive acquisition model should be good. Don't look at the quarters but instead rely on management and the overall strategy.

Excellent business with very high growth rate, profits & revenues. Europe tech exposure very strong. Would recommend investing if want a good long term investment. Very similar to Constellation Software. Owns shares in portfolio. Expecting 25% appreciation on stock price annually.