Stockchase Insights

We like KSI, and we even covered the name in one of our latest podcast episodes (link to our discussion on KSI can be found here). 

KSI is a $630M healthcare SaaS company that provides solutions for data and document management. Good sales growth is expected over the next few years, although it is not yet profitable. It generates positive free cash flows, has a strong balance sheet, strong gross margins, and we feel it is at the turning point of becoming profitable. Overall, we like the name and have it in our Growth model portfolio.
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The stock has made a bit of a 'round trip' from its recent highs but considering its strength, market share, financial position and growth, at 23X earnings (with $77B cash) we think it is buyable for investors who can look beyond the current market volatility (which will end, one day). 
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We would look at P/E (61X, vs 3-year 72X), P/CF (72 vs 70X) and earnings growth (18% vs 30%). Overall growth rates have slowed as the company gets bigger, but free cash flow has surged anf the company has $4B net cash. The stock is down 6% YTD. We think $475 would look good. 
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Losing Money in the Stock Market: Buying Fads

You know what we are talking about here. Nearly every investor has been caught buying a fad that didn’t work out. Cannabis? Check. Electric vehicles? Check. Dot-com companies (for the older folks)? Check. When there is a fad that is attracting investor attention and money it is important not to get caught up. Yes, there are often good companies doing well, and that’s how the fad or bubble is created in the first place. But investors can focus on smaller companies and there are always promoters and brokers willing to extol the virtues of a sector or specific businesses. Stick to the fundamentals. Don’t pay 100 times sales for a tiny company just because it is in a ‘hot’ sector!
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EPS of 68c matched estimates; sales of $20.90B missed estimates of $21.21B. EBITDA of $1.64B beat estimates by 3%. Supply-chain optimization could let Couche-Tard maintain fuel profitability across its key markets for the rest of the fiscal year. US fuel margins declined sequentially (down 3.9%), but increased 2.5% compared with last year, an inflection point for the metric. If the company can keep this cadence of growth for 4Q, it's likely that US fuel margins may remain around mid-40 cents per gallon for the year.  Canada might remain in the low-teen cents and high-single digits in Europe. Better control management allowed US inside-the-store margins to expand. As for M&A, recent acquisitions seem to remain on track, with the company reiterating its ambition for a friendly merger with Seven Eleven now that the possibility of a management buyout is gone. The stock is up, but this is likely more due to ongoing discussions with Seven Eleven rather than the quarter. But we are comfortable with the results.
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The Keg Royalties Income Fund (KEG.UN) is a $240M fund that invests in the Keg Rights Limited Partnership in connection with the operation and franchising of Keg steakhouse restaurants. It has a distribution yield of around 8%. Sales growth has mostly been flat over the past several years, cash from operations has shown a steady growth rate, but still quite modest. It pays around $14M each year in distributions, and its free cash flows have been around $28M. We would consider the distributions sustainable, and while its unit price has declined, its total return CAGR over the past 20 years is 8%. 
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CNC is a small ($205M market cap) nickel miner. Nickel as a commodity is expected to be in a shortage over the mid to long-term with minimal supply growth outside of China and Indonesia. It is pre-revenue and issues shares to fund its operations. It has a decent balance sheet, with minimal debt and a good equity balance. We think it looks interesting if one is looking for exposure to nickel, but its share price has been in a downtrend since 2021, and until that trend reverses, we would likely expect more downside pressure on its share price.
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Market Update

The TSX Index was down -0.55% in the month of February, up 2.69% YTD and 17.82% over the past year. Canadian GDP was up 0.3% in the fourth quarter of 2024 and 1.50% for the full year; in the USA the GDP was up 2.5% for the fourth quarter and 2.50% for the full year. Canadian inflation rate was 1.80% annually in February 2025 and the US annual rate was 3.00% in February 2025.
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EPS of 4c beat estimates of 1.2c; revenue of $225M beat estimates of $222M. Still, F2026 forecast was lowered: to sales $1.01B from estimates $1.03B. Margins to 78.5% from 79.3%. Q1 sales to $228M from $235.6M estimated. Most brokers re-iterated their ratings. It was a decent Q4, but a less-than-ideal forecast is always going to hit a stock trading at 105X earnings. We do not think it is a time for panic, and the company will see its first proft this fiscal year (ends January 31). But in this market, we think buyers can wait: we would give it a HOLD.
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We have been concerned on the company's execution, small size, high debt and economic vulnerability. It had to restructure its debt not that long ago. But the Q4 was strong, and its supply chain issue (seats) looks to be resolved. It also says tariffs should be 'manageable'. Expectations going into the quarter were very low so there was a big sigh of relief on this news. Guidance was largely expected to be cut sharply, and it was not. After several years of losses, it is expected to show a nice profit in 2025, and good profit growth in 2026. Debt has been reduced in the past three years, but the other concerns still exist. The stock had a big move but remains down on the year. It is cheap at 13X earnings. Still, it is hard for us to get excited here, just because things 'are not as bad' as feared. We still think it may have a rough time in the type of market backdrop we have this year. 
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GSI has shown historical growth, but has no analysts so no estimates are available. It has some cash and is cash flow positive, and has been profitable. Insiders own 14%. The stock has not done much, but it is a very small company in a very volatile market. It will take a different market environment of very strong growth to get investors interested. We find it interesting, for a micro cap, but it is hard to see it performing well until the markets settle down. Still, we would be OK holding now, if one has held already for a while. Note risks are still very high, though, due to its size. 
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The Advantage of Time

Time is a valuable asset in the realm of investing. Starting to save for retirement at a young age provides a significant advantage due to the power of compounding. Intuitively, most individuals tend to treat $1 as $1, however, the idea of consumption deferral (rather than immediate consumption, investing and delaying consumption) suggests that the value of $1 depends on how it is allocated. For example, $1 spent on a good or service that one can immediately use or consume has value to an individual, but even with a modest return of 7% per year, investing that $1 at age 20 can yield approximately 18 times the initial investment by the age of 65. In a sense, that $1 gets transformed into having a present-day value of $18.

This exponential growth is attributed to the reinvestment of earnings, where each year's gains generate additional returns in subsequent years. By starting early, individuals harness the full potential of compounding, allowing their money to work harder and grow significantly over time. In the below chart, we have visualized the leverage that is at one’s disposal by beginning their investment journey early. One dollar invested at the age of 20, growing at 7% per year becomes ~$21 by the age 65. As this individual ages, the future return of $1 invested shrinks – ie. at the age of 45 $1 invested for the next 20 years is ~$4. While most individuals’ incomes rise as they progress in age, this chart demonstrates that a lot of the foundation of retirement savings can be built in the early years.
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The stock has been volatile, as all growth stocks have been recently. We think merchant customers and the company can adapt well enough. However, the consumer spending impact of tariffs remains a variable. Consumer confidence has dropped, and if tariffs induce inflation then business may certainly be negatively impacted overall. Silver linings might be valuation (better of course with the decline) and sentiment (market sentiment is so bad currently any good news could amplify moves). It remains a high Beta stock. Down 11% YTD, it has actually held up better than many others.
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We are not experts on Brazil, and it has certainly had some economic issues of late. Still, the Brazil market is nicely ahead of the US this year, and positive on the year. EWZ is up 10.17% YTD. Certainly for investors looking for country exposure we would be comfortable with this ETF, with $3.2B in assets, fees of 0.59% and an 8% yield currently. Brazil stocks are very cheap, at nearly half the valuation of the US market. There are still risks, but for a generalized country fund we would be OK with this as part of a diversification strategy for sophisticated investors looking for non-correlated assets from North America. We would not want to go beyond 5%. 
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Its stock decline is not unique in this market: most growth companies have been hit very very hard, in one of the sharpest sell-offs we have seen in some time. NVO is 19X earnings now, with a 2.90% dividend. The balance sheet is fine and good growth is still expected over the next two years. We would be comfortable owning this and riding out the current market malaise, which will end one of these days (weeks, or months).
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