Investment Q&A

Q: I am hoping you may have some suggestions for dealing with this problem. One I might add your stellar advice has contributed to. Currently CSU is nudging over 10% of my portfolio and SHOP is edging over 6%. Clearly there is single company risk but were do I go to find similar excellent management and growth potential while reducing the risk.
Your assistance is as always very much appreciated.
Mike

Q: An update to my Nov 2016 comment. My now 7 year old's RESP CSU shares are comfortably 6 baggers (previously only 4 baggers in Nov 2016). Thanks again and looking forward to my first 10 bagger. Again thanks for the advice to not be afraid to buy a stock that has gone up in price. I've purchased CSU in a number of other accounts since and all are now up a minimum of 100%.

Q: I would appreciate your comments on CSU's quarterly results.

Thank you, Peter

Q: Please comment on earnings. Thanks.

Q: Hi, we started investing in Constellation Software, 4-5 years ago and stock has done phenominally well. Over time, we have trimmed the position by half, but still it is about 10% of our portfolio. This company continues to please investors with consistent growth thro' strategic acquisitions and smartly integrating in its model. Acceco Solutions acquisition for $250 mln was quite impressive. I ( and most shareholders) have developed enormous respect for Mark Leonard, as we learn more and more about his capital allocation strategies and management style as. ( Not to mention his decision to cut his salary to Zero ).

I continue to believe that CSU is tremendous value even at current levels and there is temptation to add more shares to our portfolio (specially with last 2 days pullback).
There does not seem to be many similar investment opportunities in Technology sector in Canadian markets. Would appreciate your thoughts. Thanks

Q: Hi, Could you please provide upcoming quarter estimates for CSU ans SHOP. Thanks

Q: Uber-guru Warren Buffett once said something along the lines of "Better to buy a great company at a fair price than to buy an average company at a great price". After the market pull-back of the last few days, there may be some great companies available at fair or even better prices. Can you name a few?

Q: Hi 5i team,

I currently owned these technology stocks: Shopify, CGI, Kinaxis. I am looking to add Opentext, CSU, or Sylogist. Which two out of these three are your top picks for earnings growth, financial stability and capital gain? Thanks.

Q: All in all, wich of CSU and GUD has the better future at this time ?

Q: In Leon’s recent comment about CSU.DB he said “So if the rate of inflation is 2% greater then the yr before and is 3.8 % then it is 6.5+ 2 NOT 6.5 plus 3.8”. You agreed with him.

However, the CSU.DB short form prospectus says “at a rate equal to the Cost of LivingcAdjustment (as defined below) (which amount may be positive or negative) plus 6.5% (“Floating Interest ”). Notwithstanding the foregoing, the interest rate applicable to the Debentures will at no time be less than 0%.”

The Cost of Living Adjustment is defined as “the annual average percentage change in the CPI Index during the 12 month period ending on December 31 in the prior year. For the 12 month period ending on December 31, 2014, the Cost of Living Adjustment was 2.0%.”

So in Leon’s example, the rate would be 6.5 plus 3.8.

The correct understanding of this point is of major importance to me, and maybe to others. Please check your answer to Leon carefully once again and let me know whether you stand by your earlier validation of his interpretation and if so, why.

Q: Hi, What is the YTW for CSU.DB, if it is redeemed on Mar. 31, 2023 and given a constant cpi at todays rate - what is the current cpi rate?
Are there any other important terms of the debenture besides its interest rate, 5 year call and final maturity?
Thanks. Peter

Q: For a dividend investor,would you consider this a good and safe investment given the stability of the company and the fact that an increasing interest rate environment should be inflationary?

Q: just to clarify the question from Allan re CSU.db
I have owned since day 1 and there has always been a misunderstanding on how the interest rate each march is calculated.
It is NOT 6.5 plus the rate of inflation but rather 6.5 plus the rate of CHANGE in the inflation number at the end of the year. IF the rate is neg then it would be 6.5 minus rate of change. Never to go below zero ( as per csu. lol)
So if the rate of inflation is 2% greater then the yr before and is 3.8 % then it is 6.5+ 2
NOT 6.5 plus 3.8

Q: The Constellation Software debentures, CSU.DB, seem like such a great investment, I wonder what the hidden downsides might be. They pay 6.5% plus CPI inflation – currently about 2% - which is a very high rate compared to ETFs like CLF, CBO, CPD and XHY and also compared to other blue chip corporate bonds in Canada. Moreover the inflation protection is an increasingly attractive feature. There is of course the risk of losing principal if CSU goes broke, but it is a great company with lots of sticky revenue and this seems highly unlikely, at least for the foreseeable future. The price of these debentures has been bid up, but the yield to maturity is still quite high. Are there other reasons not to give CSU.DB a large weight in one’s fixed income allocation?

Q: Just to note that there was also a ratings upgrade on CSU per Globe Investor on Tuesday:
Scotia Capital analyst Paul Steep upgraded Constellation Software Inc. (CSU-T) to "sector outperform" from "sector perform." Mr. Steep increased his target to $850 from $740. The average target is currently $750.

Q: What 5i stocks (portfolio and rated/covered) are making new highs these days?
Cheers

Q: Hi Peter and Ryan,
Would you consider Chesswood group a long term hold as the stock hardly moves and if it does, it is to the downside. It does have a nice dividend but given its performance, it is not a good enough reason to keep it. Your thoughts please. Also, i am thinking of increasing my weight to 5 percent for Savaria or Constellation software. I am leaning towards Savaria (growing sector, decent dividend, good momentum), but your thoughts please. Thanks very much.

Q: Constellation buys Acceo for C$250MM which might represent around $30-40MM of EBITDA. Whereas today CSU's market cap goes up $1.1B on a generally soft day. I'm pleased as CSU is one of my larger positions, however, is this market reaction seem appropriate to you or is something else going on? Or am I just over-analysing things? Thanks!

Q: Constellation Software announced this morning of a nice acquisition of Acceo Solutions for a price of $250 mln.
Q1: Seems like a good size acquisition, after some time. With annual proforma revenue of $116 mln, how significant is this transaction ?
Q2 : What is your understanding of the proposed financing ?
" Constellation expects to finance the Acceo acquisition on a stand-alone basis. This is a continuation of Constellation’s use of leveraged capital structures to compete more effectively for larger vertical market software businesses. "
Thanks

Q: Hello Peter. What do you think about the $250M deal that CSU announced this morning, and what do you think it will do for CSU's outlook and share price going forward in the near/mid-term?

Thanks,