Thomson Reuters Corp (TRI.TO)

Is -32% in Q1 and one of the worst performers on the S&P. The street expects AI to displace their business, compiling financial data, which he uses on the show. The street won't wait to find out if AI will indeed displace them and will sell now anyway.

Transitioned from newspapers to information. In the age of AI, information is much more commoditized. On AI concerns, many babies have been thrown out with much bathwater. If you have proprietary data, data will be king -- these companies will probably do better than the market fears.

Is wrestling with it. They have some proprietary data. A lot of what they do is data aggregation, which he will be able to do increasingly somewhere else at a fraction of the price. Large language models can't access their legal products, at least not yet. Will they be able to later? Doesn't know. Two years ago they traded at 50x PE, and now 20x which remains high given this AI pressure. TRI is intriguing but isn't convinced yet.

Software selloff is overdone. AI won't be that quick to replace a company like this. Already incorporates AI in its programs. Data is proprietary.

If you got in a couple of weeks ago, hold on. His firm is looking to get in.

Classic compounder, higher valuation. Narrative shifted around software. Lots of bad news priced in. Trades 21x forward PE, grows earnings at 10+% pretty consistently. 

AI fears overblown. Stock's finding support. Bounced on news that it's working with Anthropic. Don't expect a V-shaped bounce, be patient.

Valuation always excessive -- over 20x operating cashflow for single-digit growth. Now, that's changed with the pullback, so it might be more interesting down here.

Anthropic had announced an AI tool that could write legal briefs. There were worries this could displace TRI, which also was at a high PE before the drop. He hopes today is an inflection point where AI companies will partner with data providers which have unique, irreplaceable data. He hopes sentiment changes on the entire sector where they are beneficiaries and not disrupted by AI.

All of the Top Picks today are being tarred with the same software brush, with very little differentiation of what they do and how they do it.

Huge differentiator is its 3 end markets:  lawyers, compliance professionals, and accountants. The data in all of its core product offerings is proprietary. Employs more than 3k legal and accounting professionals to curate this information. 

Competitive advantage, including from Anthropic, is so difficult to replicate. In last few years, has already been incorporating AI into its products. Likely to maintain its moat, and perhaps deepen it further. He's never seen the valuation it's at, very attractive. Yield is 2.98%.

Piquing his curiosity in last weeks and months. Cut in half since last summer. Encapsulates all the consternation roiling around software vs. AI, and accelerated with the Anthropic release. Dominant franchise in law. Superficially, selloff is overdone.

While fears about AI disrupting are legitimate, companies can have proprietary moats on their data and networks. TRI owns 100 years of caselaw and subsequent analysis. Increasingly layering on AI tools. PE multiple not seen in years.

Once upon a time, he worked for them in Boston ;)

Falling knife at the moment. He's the kind of guy that when something gets expensive, he doesn't want to own it. When something sells off like this, his eyes get big and he sees opportunity. He doesn't see that yet. He'd have to do a lot more work to figure out whether to sell or hold. Sorry. It's not one he usually follows.

He'd leave it alone and let it settle. After 3-6 months if it stops going down, a new buyer can get interested in it.

No question they'll survive the AI threat. Question is how much will it dig into their revenues? Stock's never been cheap. Dividend of 3% is fully covered. Better places to look. Management's lost a bit of credibility with the street. He'd sell.

Fourth-quarter revenue totaled $2.01 billion, representing a 5% increase from the prior year and 7% growth on an organic basis, while adjusted EBITDA came in at $777 million (an 8% gain with a 38.7% margin). For the full year, organic revenue expanded 7%, adjusted EBITDA climbed 6% to $2.94 billion (39.2% margin), and adjusted earnings per share reached $3.92. The company surpassed analyst expectations and raised its dividend by 10%. Subscription-based revenues, which made up 84% of fourth-quarter sales, increased 9% organically, and free cash flow jumped 38% to $581 million in the quarter. The Reuters division benefited from AI-driven products and content licensing agreements, achieving 5% organic growth, while the Global Print segment experienced an anticipated 6% contraction. Unlock Premium - Try 5i Free

Valuation had been overinflated. In major selloffs, sometimes concerns are overblown. A company like this has to reinvent itself over its lifespan. We're not quite sure how AI applications will play into software companies. Looks overdone, but you don't want to catch a falling knife.

If you want to start a position, dollar-cost-average in at times when stock's been hit a bit harder.

Pulled back with lots of other software names. Proprietary database for law, accounting, and healthcare. Topline growing high single digits, bottom line double digits. Enormous amount of free cashflow. Market's worried about AI. A neatly bundled one-stop solution for its subscribers.

Fantastic business model, trading ~20x PE. He's attracted to it, but likes what he owns already so wouldn't know what to sell to buy this one. Take a hard look at it.

He always had trouble understanding it, given all its acquisitions. Too complex though it has brand recognition and is well-run. Hold on, if you own. But he loves this sector.