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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hello team. CSU appears to be in a downward trend for the last 5 days. Is this because shareholders want to lock in gains in a down market to balance their losses or is this a rotation out of thecnology stocks and into oil and resources. I note that ESL, DSG are also behaving similarly. I am a long term investor and want to better understand what are the drivers pulling these well performing companies in a downdraft. If there is a particular concern in the technology sector what might this be and what should one expect. Aside from this other recently well performing stocks such as Stella Jones and CCL Industries are on a downtrend and if these are lumped together with the other stocks mentioned above appear to all be selling off. What can you share with us and how would interpret my observations.

Thanks for your detailed insights.

Joseph
Read Answer Asked by Joseph on January 29, 2016
Q: Hi, I have owned this stock for a long time and I highly respect Marc Leonard's disciplined approach to growing Constellation to a CAD$ 11 billion company over years. However, since late 2015 and more recently in past few weeks, stock appears to show signs of exhaustion. After reaching a high of $595, a few times in 2015, stock price seems to be range bound between $495 and $525, with a day time low of $485 during January 18 market sell off. I do not wish to reduce/sell my position, but trying to figure out why this stock has been a laggard, recently. Even on the days of market rallies, while many good stocks (several from portfolios) have shown strong bounce back, price action of CSU has been only lukewarm, at best. Do you believe market is grossly underestimating its potential and stock is very underpriced at current levels? what is the short interest in the stock ? Any other comments will be most appreciated. Thnaks
Read Answer Asked by rajeev on January 25, 2016
Q: Hi Peter and Team,

With the recent market turmoil and economic conditions expected for the next little while can you name 3-5 companies that you think would be absolute BUYs? Whether they are solid companies that have been brought down with the general market, or ones that can actually benefit from the current conditions.

Thanks,

Jordan
Read Answer Asked by Jordan on January 18, 2016
Q: Hi, Nice to see Constellation software as your Top Pick on BNN !! Just a clarification about Mark Leonard's shareholding: Mark owned 1,436,136 CSU shares as per March 27, 2015 management information circular. Is there a change? You mentioned that he owns $500 mln worth of stock. Also, 17x earnings is current earnings for 2015 or forward earnings? Thanks
Read Answer Asked by rajeev on January 18, 2016
Q: I already hold a very small position of CSU in my TFSA that I purchased back in the $370 range (makes up 1% of my total portfolio). Technology is one of the sectors I want to increase my weighting in (7% currently, looking to go to 10%). Other Tech names held are GOOGL, ESL, AAPL, AVO, SYZ. I would add to GOOGL but paying +40% in USD at this point doesn't make it so compelling. So with it's recent pullback I'm looking at adding CSU. Can I have your straight up thoughts on adding CSU here? Thanks
Read Answer Asked by Richard on January 08, 2016
Q: I received this message today and wonder if you can explain its meaning more fully please. I hold the stock and debentures. Thank you.


Constellation Software Inc. Announces Rating Assignment by Fitch
Jan 06, 2016 01:44 pm | Scott Denneny

Toronto, Ontario – January 6, 2016 – Constellation Software Inc. (TSX:CSU) announced today that Fitch Ratings has assigned the Company a long-term issuer default rating of `BBB-´with a Stable Rating Outlook. Fitch’s assigned rating and outlook for the Company does not reflect any credit risk from the Total Specific Solutions (TSS) entities, other than obligations related to the TSS minority owner’s put options.

Fitch has also assigned individual ratings to the Company’s unsecured subordinated floating rate debentures, Series 1, and $300 million revolving credit facility as follows:

Unsecured subordinated floating rate debentures, series 1 `BBB-´
Revolving credit facility `BBB´
About Constellation Software Inc.



Read Answer Asked by Ann on January 07, 2016
Q: Hello Peter and 5i team members,

I have CGI group in my portfolio representing about 4% of my RRSP account.Now I would like to add 1 or 2 names in IT sector to bring up my sector weighting to about 10 to 15%. Could you please provide some recommendations for a long time holding (say 5 to 10 years)? Thanks.

Wish you and every one of your team a very merry Christmas and a happy new year!

Lin
Read Answer Asked by Lin on December 21, 2015
Q: What is the max weighting in any particular stock you would recommend holding before selling.

For myself I hold between ~50-60 different stocks.

Is this too many, and should I get into 30 or 40 positions, or what is the optimum amount of positions.

With this many positions should I get rid of ETF's as I should be diversified enough?

I have smaller than full positions for more risky and growth names, and i have up to 5.5% for stocks such as CSU and CCL.

Is it okay to let these run longer and up to what percentage of a portfolio?

I know you don't know my exact situation but I am looking for some boundaries or rules that I should follow?

For example: Optimum amount of positions for a diversified portfolio, and max weighting in any one stock. If diversified enough would you recommend letting go of ETF's. I hold 6 ETFs each at around 2%.

Thanks, Colin.
Read Answer Asked by Colin on November 08, 2015
Q: Peter, I have owned CSU for quite a while and it is time to rebalance. I would like to keep my IT sector at 20% and I am thinking of selling CSU down to 5% and adding to my other IT stocks namely DSG, ESL and DH. Would you suggest I keep these four stocks or should I add another stock to this sector?

Thanks, Stephen
Read Answer Asked by stephen on October 27, 2015
Q: I was hoping to get your thoughts on Venator's position on CSU:

http://www.venator.ca/uploads/FEB_2015__Final_.pdf

"I just don't like paying for acquisitions that haven't happened yet, and when you pay more than 20x earnings for an otherwise no growth company that is exactly what you are doing. This is why we own Open Text but not Constellation Software. If Open Text doesn't make an acquisition for the next two years it might drop about 10%, putting its valuation on par with Oracle (to name another low growth consolidator); the same scenario played out with the aforementioned Constellation Software would send that stock down over 30%."

CSU's share and earnings growth is largely based on its excellent ability to acquire businesses and less so on on its organic growth. If CSU is unable to acquire companies at the same pace (the larger it gets, the bigger the acquisition required to make an impact), would this not cause a material negative affect on its valuation?
Read Answer Asked by Arneh on October 14, 2015
Q: Read the recent questions re: CSU so will reframe mine as follows:

1. Globe investor shows forward PE at a very reasonable 16.3. Do you concur?

2. The stock has been trading in a range between 530 and 600 for the past three months. CSU has been a massive win for me but has shot up to 13% of my portfolio which I know is too high. It's probably time to abandon the "let winers run" approach and take some money off the table but the real question is this: knowing that a share split is not in the cards per the CEO, and with a tiny yield, have we had our fun? i.e. Do you see a scenario where the stock retests 600 let alone surpasses it?

Thanks as always for your insight.
Read Answer Asked by Kim on October 12, 2015
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