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Review of Constellation Software Inc

APR 03, 2025 - The company has been really innovative in the capital allocation playbook by switching to spinning out “mini Constellations”, which encourage not only entrepreneurship but also autonomy and operational efficiency at the managerial level. Software businesses have limited exposure to tariffs and geopolitical uncertainty. Despite a challenging operating environment of a potential recession, CSU’s portfolio of businesses is expected to continue to do well due to the recession-proof nature of VMS businesses. CSU is a high-quality name to own amid a volatile market that balances both upside potential and downside protection. We think CSU will compound capital just fine over time. However, given its current market capitalization of more than $100 billion and an all-time high in multiple valuations, the compounding effect will be decent but not as impressive as it used to be, which investors need to have a realistic expectation. We think the investment thesis in CSU as a long-term compounder remains unchanged, we are maintaining our rating at “A”.

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5i Recent Questions
Q: My daughter's portfolio consists of the above stocks (CSU, ENB ,IFC, ISRG, SIS, SHOP, WSP, ZSP). She likes to hold good stocks for along time. She Is comfortable with moderate risk and has a long runway for investment. She has money to invest and would like to add stocks which would improve the balance of her portfolio. Could you suggest a few stocks to help her achieve her goal. She is not adverse to owning 1 or 2 higher risk growth stocks. Thank you for your help.
Read Answer Asked by jacques on July 23, 2025
Q: Topicus and Lumine shares are hitting all time highs, which is Awesome !!!

But, at the same time, the parent Constellation Software stock has been struggling to break back above $5,000 level and still trading well below its high of $5,332, reached in May, this year. CSU shares seemed to have lost momentum, right after its last earnings release and have n't recovered, since.

What has caused the recent sluggish pattern with CSU ? Do you consider this trend, simply short term ? Are there any near term catalysts ?

Also, curious, what percentage of Constellation's market cap comprises of its ownership in TOI and LMN ( present and any future conversions ) ?

Ignoring any personal advice, would you be comfortable and consider an ownership of CSU,TOI and LMN at 10%, 4% and 4% levels, respectively, as a decent mix, in a Balanced Portfolio with a Growth bias ?

Thank You
Read Answer Asked by rajeev on July 21, 2025
Q: I know you are not specialist of out of Canada companies but Röko AB is an investment company, founded in 2019 that specializes in the long-term acquisition and ownership of profitable small and medium-sized enterprises (SMEs) in Europe.

Their approach is that of a "perpetual owner," meaning they do not intend to sell the companies they acquire, similar to CSU.

Their strategy is based on the following principles:

Company Portfolio

Röko holds a diversified portfolio of companies across Europe. Here are a few examples to illustrate the variety of their investments:

Addedo (Sweden): A software reseller and consulting firm specializing in financial consolidation.

Atemag (Germany): A developer and manufacturer of components for CNC machines.

Les Deux (Denmark): A men's fashion brand.

ETB Technologies (United Kingdom): A specialist in refurbished enterprise IT hardware.

Oppigårds (Sweden): One of Sweden's leading craft breweries.

Pureoptics (France): A provider of network transceivers and cables.

Financial Information and IPO

I read that Röko AB completed its Initial Public Offering (IPO) on Nasdaq Stockholm in March 2025, generating strong interest from institutional and retail investors.

My question is: Is this a copycat of CSU and would you invest in it considering it's market cap ?

Do you like the CEO Fredrik Karlsson, was previously the CEO of Lifco, another highly successful Swedish serial acquirer ?
Read Answer Asked by jean on July 18, 2025
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