Investment Q&A

Q: Peter and Team,

I've been a holder of CSU for a number of years, trimming the position as it gets overweight in the portfolio. With the recent down draft, I am at approximately 4% weighting.

Any thoughts on topping up the position and, further, why the big downdraft in the stock now? I have seen these down drafts with CSU leading into earnings announcements in the past only to have them beat and the stock rallies a lot in the following weeks.

Thoughts? Is this a case where we should sell and wait on the sidelines until we see a bottom start to form from a technical perspective and then buy back in?

Q: Hi,
Jason Donville was on BNN this morning and mentioned that Veritas had done a report on CSU with a sell recommendation. I don't see anything on the internet on this. Wondering if you've seen the report and if you have any comments on the content of the report. Thanks.

Q: Is there anything in particular causing the big drop in CSU the past couple of days. Seems odd with many tech stocks going up that this one is heading down. Thanks.

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

Q: Mr. Hodson, CSU 487$ ?

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

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

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

Q: Hi 5i - for those of us who didn't buy CSU (on the way up), do you think the price today is a good entry point long term, or would you wait (due to the current market volatility) and try to pick up cheaper? Thanks, Neil

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

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.

Q: Re: CONSTELLATION SOFTWARE INC UNSEC SUB FLTG RT S1 DUE 03/31/2040 INT 7.256 %
What is the schedule of payment of interest on this security? Is it still worth it for income?
Happy New Year to all at 5i,
Rick

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

Q: Hi Peter and team,
A recent question on ESL elicited the comment that it misses estimates about half the time.
What would you say about CSU - what is the approximate frequency it misses? I'm guessing it's lower.
Thanks,
Mike

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.

Q: Can you give me a site providing short interest for all TSE stocks rather than top 20? Looking for CSU short interest.
Thanks

Q: When you look at the quality of a company, how important is looking at Return on Average Equity?

And can you please tell us what the ROE for CSU is in the latest quarter they announced?

Q: Q3 report. Comment please.

Q: Hi, I would appreciate your comments on CSU earnings released Wednesday evening. Looks like a nice beat on EPS ($4.67 against $4.23 estimate)and EBITDA ($120 mln against $117 mln est). Currency headwind appears to have impacted organic growth rate for this quarter and 9 months period. Thanks

Q: Constellation will issue its earnings release tonite. Could you please advise what analysts' expectations are for CSU's results? And thank you for helping us soldier through this very difficult market. Peter