Cantor Fitzgerald analyst Tom Liston continues winning ways

Cantor Fitzgerald Canada analyst Tom Liston, who came over from boutique firm Versant Partners last summer, has a hard-won reputation as a top stock picker, delivering returns against a market that has rarely been in his favour.

Liston, noted Wellington’s Mark McQueen when that deal happened, “has..been the top Starmine stock picker probably more than any other active Canadian software analyst”.

Pretty good for a guy who won’t blow out the candles on his fortieth birthday for some time yet.

In January, we asked many of the tech analysts who contribute their research to Cantech Letter to give us their top pick for 2013. Not pick(s). Not sectors. Not themes. We wanted the single stock they thought would perform best this year.

Liston’s choice, while perhaps unsurprising to those who follow his work closely, nonetheless shows the youthful analyst knows a good thing when he sees it.

Liston chose Waterloo-based logistics firm Descartes Systems Group (Descartes Systems Group Stock Qoute, Chart, News: TSX:DSG) as his Top Pick for 2013. A little more than halfway through the year, Descartes is already up 27.9%. The stock closed 2012 at $9.26 and closed yesterday, July 9th at $11.85.

In January, the analyst outlined his reasons for sticking with Descartes:

As mentioned in our report on Descartes’ User conference late last year, our conversations with several customers and partners support our investment thesis: its continuation as a highly strategic vendor to many of the world’s best companies whereby its “network effect” has resulted in a very strong pipeline. Descartes’ shares have material upside on the basis significant new customer wins and pipeline while also providing downside protection with its high recurring revenue and industry leading margins. Descartes has recorded 32 consecutive quarters of EBITDA improvement.

This year, the company’s remarkable consistency has continued. Late in May, Descartes reported its Q1, 2014 financial results. The company earned (U.S.) $2.8-million on revenue of $34-million, a topline that was up 14% from the $29.9-million the company posted in the same period a year prior.

In raising his target on Descartes to $13 following the quarter, Liston, along with colleague Justin Kew, pointed out that Descartes still trades at a steep discount to its peer group of SaaS and logistic technology comparables, which includes SciQuest, Vocus, and SalesForce.com.

Sticking with a story has become a hallmark of Liston’s research style. He has consistently regarded Catamaran Corp. (formerly SXC Health) as a top pick, and the company has rewarded his longer term vision by climbing from its roots as a small provider of healthcare technology based in Milton, Ontario to a company that posted nearly $10-billion in revenue in fiscal 2012, soon after earning top spot in Fortune Magazine’s 2011 100 fastest-growing companies list.

With the tech sector outperforming all others in Canada again this year, investors get a chance to see what Liston can do with the wind at his back. Picks such as Absolute Software (Absolute Software Stock Qoute, Chart, News: TSX:ABT), Redknee (Redknee Stock Qoute, Chart, News: TSX:RKN) and Constellation Software (Constellation Software Stock Qoute, Chart, News: TSX:CSU) have all delivered outsized returns to those who picked up on his research early.