Tucows Inc.

(A Top Pick April 26/16. Up 165%.) Internet domain names was viewed as a very flat, dull business. He felt this was under the radar screen and not a lot of attention being paid to it. It is now trading 19X this year’s EBITDA, so it has gotten a little ahead of itself, and may be a little expensive.

They are the number two domain marketing company. They are on fire. US investors have fallen in love with it. He does not see how it can keep going up at the same rate.

Only 2 analysts cover this. A Toronto-based telecom company that operates entirely outside of Canada. They are a mobile virtual network operator (MVNO). They cut deals with Verizon (VZ-N) or T Mobile to buy rates from them, brand it under their own name, resell it, and have their own customer service. They really focus on customer service. Their value proposition is about half of what the incumbents charge in the US. Because they are using someone else’s infrastructure, it is a capital efficient business with about a 29% ROE. Management has been buying back a lot of shares.

This has 2 businesses. Domain registrations and reselling of mobile phone services. In the mobile phone selling, they specialize in doing customer service themselves. As an offshoot of that, they have launched a 3^rd business, high-speed Internet to non-urban locations in the US. Trading at a reasonable valuation with a growth profile and generates a lot of cash flow. Bought back over 50% of their shares since 2007.

This is the GoDaddy.com of Canada. Every year they keep buying back more and more stock because there is so much cash flow. They are now trying to get into the telecom through the Internet. The company is extremely excited about the growth in that business. The Internet domain is the cash cow (the 1^st cow) and the 2^nd cow will be Ting (?). That one is not as profitable, but the profitability is growing rapidly. Has a 31% ROE.