Solium Capital Inc (SUM-T)

(A Top Pick Jun 14/18, Up 59%) It is another example of an undervalued tech company in Canada. It was taken out by MS-N just over a month ago.

A software platform with large cap clients. They manage employee stock purchase, stock option plans and share buybacks for publicly traded companies. Sales are growing rapidly. They have a high level of recurring revenue. The upside is huge here. (Analysts’ target: $12.91).

Basically provide a lot of employee benefits, particularly with regards to stock options, etc. They advised they were expanding into Australia and the UK and that expenses would go up. Earnings are expected to grow from $.21 to $.28 however you already have a 26X PE. If they are successful, they will have a 12% ROE. 14% growth against a pretty high PE for next year is why the stock is marking time. Expects there will be a continuation of the sideways move for another 6-12 months.

Has owned this 3 times off and on over the last 3 years. Just reported and the ROE is just a little bit lower than where his threshold is. He is looking for 20% growth and this is growing at 17%, which is still not bad for a lot of people.

He has a small Short position. It is really more of a quantitatively driven Short. Earnings estimates, on a go-forward basis, have shown negative momentum. Had a good run in Canada on benefit processing and things like that, and are trying to do the same in the US, which is a much more competitive marketplace. Thinks there is more risk to the name then upside.

Software as a service with a high recurring revenue model. Just reported their earnings and people were disappointed. They were down 29% year-over-year. Expanding into other markets. Earnings estimates have been revised downwards by about 4% in the last 90 days. PE is 28X for 2015 as opposed to 24X. Thinks the stock will mark time as people wait for coming quarters to see if there is any improvement.

Reported good earnings yesterday. Has a very interesting service, equity planning for major corporations.

Sold most of his holdings after their big run. They are trying to move into the US. On a valuation basis, he thinks it is pretty extended here. He also sees the growth slowing. A highly competitive business in the US.

His only concern with this is valuation. ROE is quite high, but the stock is now trading in the 22-23 times earnings range, which is getting pricey. Reporting this week and he expects a good quarter. When stocks get trading up in the $20s X earnings, he likes to try to find that same level of growth at a more reasonable price. Has been trimming of late because of valuation.

If you continue to come out with good earnings then people will continue to pay you a good multiple. You should take some money off the table if you have had a good run but keep it as a core position. 5 or 6% in a stock is where you take some off the table. $8 is fully valued.

Software services. Best-of-breed technology in Canada, US and the UK and are being invited into Australia. Has a great long-term track record. The correction for the last quarter was when they made an acquisition where costs were higher than what was expected.

He doesn’t have a huge position but is building one. They basically work in the financial services world of managing employee-share ownership plans, etc. Very complex business and the software programming that allows this to be done is really their strength. World-class software company. Getting quite entrenched in the UK, US and Canada. Have been invited into Australia. ROE is very strong. Don’t chase this one, start accumulating.

Has done a little bit of work on this but is not an expert on it as yet. Really likes what they are doing in terms of third-party pension administration. Companies are outsourcing all sorts of administrative issues. They don’t need a whole lot of capital, because it is a service business. Stock has done very well and the numbers have been rock solid. A little expensive, but investors are anticipating a wave of outsourcing going to this company.