Someday, Constellation Software (TSX:CSU) will stop going up, but that won’t happen in 2015, says one portfolio manager.
Jason Donville, President & CEO at Donville Kent Asset Management was on BNN’s Market Call yesterday and revealed his top picks. Kent says Constellation, which has risen from under forty dollars in 2010 to a closing price yesterday of $376.15, will continue to rise on the back of what it has repeatedly demonstrated to be its real expertise: buying other companies.
“My expectation is that it’s going to be another great year of acquisitions for Constellation,” said Donville.
Citing a recent debt financing, Donville says he thinks Constellation might be ready to make a big move.
“If you don’t think you are going to be acquiring something why would you be raising debt right now?,” he asked, rhetorically. “What they are signalling to the market by doing their debt deal back in autumn is that they think they are going to have a use of capital because they are brilliant capital allocators. The last thing they want to do is be overcapitalized by taking on a bunch of money they can’t employ.”
While the analyst consensus on Constellation is that the stock is a “Hold”, Donville thinks that take will be proven to be too pessimistic.
“My guess is that by the end of the year they will have beaten the current year’s estimates by a good ten to fifteen per cent,” he said.
Donville’s other top picks are Valeant Pharmaceuticals (TSX:VRX) and CGI Group (TSX:GIB.A). Click here for the full segment.