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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