Constellation Software Inc. (CSU.TO)

Here is a company that has gone around buying up other software companies. Now we are late in the investment cycle. The multiple got to a high level so he would expect consolidation.

Tricky name. Widely owned. They have to continuously do deals to show good return on invested capital and they might make a mistake. That is his fear on this stock.

(Past Top Pick Sept.18, 2017, Up39%) They will consolidate for a while. They've come off lately, but have performed well this year. Their challenge is that as they acquire software companies to grow, so they have to either buy bigger or more companies to maintain their pace of growth.

Net income has been flat for three years. To move the needle, they have to make a lot of or bigger acquisitions. Historically, this has done well, but today it's expensive. Management is very arrogant--it won't do a conference call with investors. He doesn't like that; communicating with investors is fundamental. No clear strategy; it's a hodge-podge of small companies.

One of the best run tech companies. Growth by acquisition. Not cheap at 35x earnings. Beautiful chart. Top-drawer management. If you’re not worried about the valuation, it’s fine to own it.

They've bought a lot of little companies that specialize in "vertical applications" which fulfill a single purpose and do it well. They then divided them into six divisions they manage. They could aquire far more, so they have a big possibility of growth. The street didn't like their last quarter, but investors should look at the long-term: can they use their capital wisely to make these acqusitions? Yes. Based on the past, they are smart acquirers with 31% ROE on these purchases. Smart managers. (0.5% dividend, Analysts' price target: $1,073.58)

As long as its longer-term uptrend remains intact, he'll continue to like it, and consider the near-term pullback as a buying opportunity. (0.6% dividend, Analysts' price target $1,083.64)

This is a good time to buy, he thinks. Growth has been exponential and there is a pristine balance sheet. There is no problems with this company and is a very attractive buy. He thinks the lack of quarterly updates is reasonable as he thinks people should not focus on the last 90 days performance.

They reported earnings recently and the stock is down as a result. They are moving away from quarterly management calls and thinks this is strange. They are trying to make acquisitions and may have felt they were giving away too much information. A great stock to own, continue to hold it for the long term. It is cheaper than similar quality tech companies in the US.

It is a really well run software company. They buy up companies and cut costs. The market has awarded them a very high valuation multiple and they may have trouble continuing to grow as quickly.

He held this for close to seven years, but sold it back around $700. He thought their niche was based on smaller acquisitions, which no longer works at this scale of business – it is hard to move the needle now.

Despite the rapid share price rise, he still thinks they are undervalued. They have been acquiring companies very profitability. As long as they compound shareholder wealth at 30%, their cash ROE is almost 100%. Don’t be put off by the high 60 P/E ratio. Yield 0.5%. (Analysts’ price target is $964.42)

First Canadian company trading over $1000. The chart looks really good from the early-April rally point. It is looking a little over-extended and could be subject to a pause. A 50 day moving average would be a good reduce point to lock in gains and the 100 day as a stop.

Insiders own a fairly large chunk of the stock and there have not been many share offerings. Management must invest directly in the stock – not just through stock options. They continue to deliver and have a great balance sheet. If you own it, you probably don’t want to sell it.

Acquisitions grow this company. Problem is, to continue growing at this pace, they must accelerate acquisitions, and it's getting harder for them to buy companies at the right valuations. Constellation itself has a high valuation which scares him off. That said, management is good at delivering growth.