Six reasons why you should own Constellation Software stock
Summary
Speaking on BNN Bloomberg on Wednesday, Del Vicario of Hillside Wealth Management explained why he chose CSU as one of his top picks exactly one year ago, starting with the nice 35 per cent return the stock has delivered over those 12 months. “If you look at since they went public in 2006 I believe the compound rate of return of this security has been in the mid-30 per cent range, which is really outstanding.” Founded back in 1996, Constellation has made a name for itself by more or less writing the playbook on M&A and how to become a successful serial acquirer without breaking the bank. Constellation’s acquisitions number close to a staggering 100 per year, with the bulk of them being smaller purchases under $10 million, although the company does shell out bigger on occasion. There have been worries grumbled from the sidelines over the years about Constellation’s strategy of buying companies and then plowing the generated cash back into further acquisitions, with the complaint being that some day CSU will either run out of good vertical market software companies to acquire or in the very least that the crop of potential acquisitions will get thin enough or expensive enough to make the CSU model fail. The result has been that CSU will keep their free cash flow investment strategy for small and mid-sized acquisitions but lower the hurdle rate for larger purchases.
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