Investment Q&A

Q: I thought you were offering a portfolio analysis for a fee but cannot find a link or any info. CSU is getting to be a bigger part of my investments and should maybe be trimmed. Is the analysis still available? Thank you. (I'm not sure if this question was accidently submitted already)

Harvey

Q: I hold two tech stocks at present, ESL and GIB.A. I would like to add a third and wonder which of the following you favour at this time: CSU, ET, OTC, SYZ. Thank you.

Q: Thanks for your question replies. I now need to bump up my Industrial-Tech sector and reduce my Resource sector weightings. I am a retired dividend-income investor.

I want to add CSU, but it has jumped lately. Should I wait for a bit of a pullback to around $300? Any other Industrial-Tech companies that pay a dividend and that you would recommend buying at this time?

I own BTE, CPG, SGY. Which of these would you lighten up on? Which of these has the most secure dividend, given lower oil prices and their respective hedging programs?

Should I wait on adjusting my energy weighting for a bit of a rebound? Seems like I'd be selling oil at the bottom to buy CSU at an all-time high?

Thanks in advance,
Steve

Q: Could you please tell me your top 3-4 picks for pure growth stocks in Canada to buy today. I'd appreciate if a couple could be more established (such as CSU) and a couple more "up and coming." Thanks.

Q: Peter and Team,

I've owned Constellation Software since the model portfolio was created and have done well with it... very happy, great pick!

Reading their quarterly results, it seems like they are firing on all cylinders still - cash is up, debt was reduced, they grew both by acquisition and organically, earnings per share are up - things look good and the company still seems like 'A' quality.

Am I missing anything?

Q: My word what a jump ... is it time to trim back?? Do we stick with the 5% rule (weighting) or ride this pony further? TY.

Q: CSU had a good run and has been consolidating at the current price level. Any developments that would warrant adding on a pullback here?

Q: There's an interesting take on CSU rights I found in my inbox from Seeking Alpha (here: http://seekingalpha.com/article/2490895-constellation-software-rights-a-low-risk-high-reward-special-situation?uprof=44) that argues the rights should be trading at 94 cents. One little aspect it ignores is that if you purchase rights as opposed to having received enough to purchase adequate debentures you will be receiving less than 1% interest in the first year on your market price vs. the 7.4% coupon on par. Also they compare this issue with a Microsoft bond without highlighting the difference in credit quality.

This email went to hundreds of thousands of Americans, so we'll see if the rights lift off 55 cents on Monday!

Q: CSU Rights are trading at ~$0.59 and for every 21.192 Rights held, the holder of such Rights will be entitled to subscribe for C$100 principal amount of Debentures, exercisable at a price of C$95.00 per C$100 principal amount of Debentures purchased. Am I correct in thinking that the effective cost of buying the debentures is then $0.59 x 21.192 = $12.50 + $95 = $107.50? Are you still a fan of these at that price?

Q: Hi 5i: some additional thoughts on the CSU debentures. Shouldn't people think first about whether these debentures are really the right kind of investment for them? For starters, maturity is a long way out (2041?), so the fact that you can buy 100 face value for 95 with your CSU rights is not as material as what the debentures will trade for in the meantime. Second, long term corporates may not be a good idea from a risk standpoint. Hank Cunningham I believe suggests that average fixed income investors keep their corporate maturities at 10 years or less, just because the corporate world does not provide sufficient visibility to justify going longer. Let's remember too; this is no utility; this is a tech company with a significant growth by acquisition component, despite successes to date. Third, if these really are the product for you, shouldn't you be thinking about whether you would use market purchases to top up to your regular position size, essentially with the rights just giving you a small potential discount on the whole position? Along those lines Peter, would you consider making CSU debentures an important addition to the Model Income Portfolio and, if so, take us through the analysis of whether to go ahead with the purchase at anticipated prices and what you would sell to do so? Thanks!

Q: I own 25 shares of CSU. I have pretty much ignored the talk of debentures since I understand nothing about them. However, I've now got some CSU.RT worth practically nothing sitting in my discount brokerage account. Do I have to do anything with it? Why do I have it at all?

Q: As for Kathy's question on acquiring a small CSU debenture with rights, possibly she ought to check with her broker to see IF a $200 bond could be sold. This quote is from the itrade site "Face value should be in multiples of $1,000.00 as there are no fractional bond units, except for strips where the rule in multiples of $1,000 does not apply." Also it is not possible with them to trade anything less than a $5000 corporate bond online.

Perhaps for most of us small holders of the rights the best course of action is to sell them on the open market; otherwise you might be stuck with an unmarketable security until maturity in 2040. Alternatively if you're really keen on the debentures you could purchase enough rights to get up to the minimum trading levels so you are holding something marketable. Thanks, J.

Q: Hi 5i Team
I have only 50 shares in CSU which means that I would only be allowed to buy two $100 debentures. Because this is so small is there any point in my exercising this right? What would be the downside if I did?
Kathy

Q: As a Constellation shareholder, rights have been deposited into my account and I have been considering an additional purchase of rights (CSU.RT)on the open market to participate more fully in the debenture offering. However, I have no experience in such rights offering and no idea as to how to value them. From the price action in the first week of trading ( ranging from .40 to .70 cents), I suspect I'm not alone. Any advice, suggestions, guidelines appreciated.
Thanks

Q: My question is to purchasing CUS stock or the debenture.As a current shareholder I received rights to purchase the debentures but wonder whether this capital should be used to purchase additional equity?
Thanks For your help.

Bob Rose

Q: I have a small position in constellation software. What would you think of acquiring some more rights and invest in the debentures by borrowing against the home line of credit? Maybe even convert it to a mortgage amount at a lower floating rate?
The interest rate on the borrowing is a floating rate as is with the debenture and the premium offered with the rate reset would more than justify the risk?

Q: What is your opinion of the debenture offering by CSU through debenture rights to shareholders?

Q: Hi, We hold Constellation Software shares. The cut off date for debenture rights CSU.rt was August 21.The rights have already started trading. Will the rights be deposited to my brokerage account? What would I need to do to exercise my option to apply for debentures? Can I also buy extra rights? Thanks for your help, as always.

Q: Hi Guys,

My question is about the Constellation Software Rights(CSU.RT). The way I calculate things, each right should be worth around 24 cents ($5/21.192). Why would they be trading at 41 cents, 70% higher?

Am I missing something or making a calculation error?

Thanks for the help.
John

Q: Based on yesterday's close Auto Canada's (ACQ) price to book ratio is 7.25 compared to Constellation Software's (CSU) 21.26 and trailing PE ratio is 36.21 compared to 57.47. Considering the nature of each company's business and assets, which I appreciate are comparing apples and oranges, I consider ACQ fully valued however significantly more reasonably priced than CSU. Doesn't the high rate being offered by CSU on the recent rate reset pfd share issue indicate the risky nature of CSU as an investment? How does the market justify a price for CSU that is so high relative to what is supported by their financials? Could I please have your comments?

Duncan