CGI Group (A)

GIB.A-T

They can acquire businesses at attractive valuations then run them well. He likes it a lot and thinks the management team is top notch.

An interesting company that offers solutions to people with problems in the computer area. This is a growth stock. The PE is reasonable. If you want a growth stock, it’s not a bad stock to own. It’s not just in Canada and the US, but also in Europe.

A big IT consulting firm. Has very good contracts. Management is doing very well. The balance sheet is very strong. The chart shows it is steadily going higher. As technology gets more sophisticated, companies are finding it difficult to keep abreast of the changes, so there is more and more outsourcing taking place. (Analysts’ price target is $74.)

There is a new CEO in the last year. It is likely he will put his stamp on the company in some form. It is Canada’s largest IT services company. They could make a transformational acquisition. They have a history of doing this. It is a good play on the US economy where they have their largest customer. (Analysts’ target: $74.00).

The period of seasonal strength is from now until January. The stock has good support and there is a good chance it will move above resistance.

He likes this at these levels. He models an 8% EPS growth. Thinks you will get share buybacks and margin expansion. There is capital employment opportunity and tuck-in acquisitions. It is a pretty fragmented sector. The only bad thing is its price. It is trading at around 17X versus 15X its 5-year average. There are also the rising Cdn$ headwinds.

(A Top Pick Sept 13/16. Up 4%.) Was surprised this has not done better. She still likes the stock. A great growth name. They don’t pay a dividend, so are definitely interested in growing their business and reinvesting in the business, outsourcing and integration. Outsourcing is on long-term contracts which has more stable cash flow streams. Every few years, this tends to do a large acquisition to increase their geographic scope or their vertical they want to increase their presence. They are ready to do another acquisition, but haven’t been able to find anything that fits their financial discipline, so have been making a lot of smaller tuck in acquisitions. They are seeing good pickup in organic growth, particularly with the whole issues of Cyber Security and automating processes to compete with new technologies. Cyber Security is going to be an ongoing trend.

TSX Infotech sector? He would look at this and Open Text (OTEX-T). He doesn’t look at this one too much, because it doesn’t pay a dividend, but it has been a very good performer.

A company that is a little unique in Canada. A computer services company which can do your programs. There was a big fuss because they got some programs screwed up in the US. A little scary in that it is a very volatile, but the multiple is not outrageous. This is something he might consider participating in, in the future. Most of their programming is in Europe, so it is different for a Canadian company.

Canada’s largest provider of outsourcing IT services and solutions. Trades at a modest multiple on earnings of about 16 or 17 times. New management has ambitious plans to double the size of the company over the next 5-7 years. They’ve been doing small tuck in mergers and acquisitions.

(Top Pick Sep 2/16, Down 3.15%) It has great valuation and is stable. They are doing more and more tuck-in acquisitions. They are still on the hunt for the ‘big’ acquisition. It is still cheap. 18% ROE. Price momentum is starting to wane. They can grow by acquisition.

Open Text (OTEX-T) or CGI Group (GIB.A-T)? These are in different businesses. This one does not carry a dividend, and if you don’t have a requirement for that, this is a high-quality company. Both are good companies and he would have no trouble buying them here.

(A Top Pick Aug 10/16. Down 2.38%.) Has been really disappointing. Revenue growth picked up nicely and margins started to expand, outside of this one quarter, where they are starting to make some investments into the demand they are seeing. That hit margins a little. She feels the market just got a little ahead of itself. Trading at a pretty decent discount at this point.

He is looking at all the Canadian tech stocks, simply because they are down relative to the US ones. This one is reasonably valued and is a fine company. They do a nice job in their contract work and it is a stable producer.

This company benefits from the transition to the Cloud. Thinks they will benefit from a combination of acquisitions and a transition from on-premises computing to off-premises computing, which really is the Cloud. A very significant size of their business is in Europe, where a lot of companies are in the early stages of making a migration to the Cloud. (Analysts’ price target is $74.)