Descartes (DSG.TO)

Has been a good company for the last 10 years, but their ROE is only about 12%-13%. He typically focuses on companies that have ROE’s of 22%-23%. This has the potential to have their ROE creep up, but to some extent the company is over capitalized. It has too much equity in relation to its profitability. Thinks it can do better.

Essentially a logistics provider to improve the efficiencies of businesses. A very predictable, very steady business. At the beginning of every quarter they know about 90% of what their sales are going to be, so they spend the next 90 days getting that last 10% of that business. Likes the predictability.

Logistic software company and they want to do everything with anything to do with logistics. The company has been kind of quiet and sitting on $100 million in cash. In July of this year they did 2 fairly significant acquisitions. One has a kind of Homeland Safety kind of angle. There are certain people and companies that you cannot deliver to for logistic reasons, so they bought a company that controls that process to make sure you don’t deliver to the wrong people. That has been a very, very good kick starter to their business, and investors are starting to appreciate what they have done with their cash. It now has very, very good momentum. The stock is quite expensive on an earnings valuation basis, but if you look at consensus forecasts, earnings are almost expected to triple over the next 18 months. 43% of their revenue comes from the US.

(A Top Pick Nov 10/14. Up 33.41%.) This does well because it has about 85% recurring revenue. ROA is 8.6%. Extremely low volatile kind of stock. If you own, it is perhaps time to take some money off the table, because it is trading at the top of a valuation band.

Basically a cloud-based network to improve productivity, performance and security for transportation/logistic companies. Government regulations work in their favour because on transportation of goods, the receiving country wants to know what’s in it before it gets even close to the border. Have been growing organically as well as by acquisitions. Their 4^th quarter free cash flow yield is 3.3%. The 12% forecasted ROE looks attractive. Earnings are forecast to grow about 15%. Trading at 25X Enterprise Value to the February 2017 fiscal year-end earnings estimates of $1.07.

A low maintenance stock. Every portfolio should have a couple of these names in them. On the 1^st day of a quarter, they know with 90% certainty what 90% of their earnings are going to be. They spend the next 90 days determining that last 10%. Because of this, their quarterly events tend to be a non-event, which from his perspective is great, because he loves avoiding surprises. This stock grows about 15% annually. They do a lot of small tuck-in acquisitions. A nice play on global logistics and global trade, as well as increasing security. They help to smooth the customs duties path for cargo. Buy on the dips and hold it for the long run.

Sees continued growth in this. Have good order systems for delivering products on time. This is a continued earnings growth story. Well positioned for the focus on logistics. Lots of organic revenue growth potential.

Has owned this for a long time. A low maintenance stock in his portfolio. It’s often hard to chase a stock when it is at its 52 week high. Likes their consistency. On day one of their quarter, they know what 90% of their revenues are going to be, so they spend the next 89 days getting that last 10%. A nice growth story. Tends to grow at 15% EBITDA annually. His philosophy on this is to Buy on the dips. A nice play on a global growth of trade, as well as the increased regulations taking place.

Has always been over capitalized. The old CEO has now stepped down and there is a new management team. Products were always great, but there is a little bit of change in the executive suite that might be a positive for them.

A global logistics software company, with high recurring revenue. Has been about half as volatile as compared to the market, with a five-year beta of 0.4. Also, has a low earnings variability that has an attractive rank of A-. Cash flow was up 13% year-over-year to 3.6%. Cash is about 12% of its overall market. Cash flow is forecast to grow at 16% for January for the 2000 (?) fiscal year and ranks in the top 10% of his Quant model.

CEO has stepped down, but the transition has been smooth. This is one of the most predictable stocks. On the 1^st day of a quarter, they know 90% of what their revenues are, so they spend the next 90 days working on the 10%. This is a stock that never disappoints because it is so predictable.

Tough to find an attractive entry point. Organic growth as well as tuck in acquisitions. Thinks eventually it could get taken out.

(Market Call Minute) New management, a roll up strategy. They have a very good multiple and he would want to see it pull back.

Had a great run. Grows at about 15% the year. He likes the recurring nature of its revenue which is at about 90%.

He shows an earnings estimate of $0.87 for the Jan 2015 year end. This gives a 17.5 PE with a crisp earnings forecasts of $0.59 growing to 87%. Market has great confidence that the 15% growth in EBITDA will continue. A free cash flow positive company at just under 4%, so that even though the stock looks pricey, 80% of their revenue comes from recurring revenue. It is an extremely sticky product for the customer base in the transportation space. As a result, you will see some very high enterprise value to EBITDA of 15 to 18 times on companies like this. Likes the company. Ranks in the top 5% of his database.