It’s hard to go wrong with CGI Group stock, this portfolio manager says

Investors may have gotten rightly spooked by the broad technology sector selloff last quarter but you’d be missing the boat if you weren’t looking into tech right now, says David Burrows, president and chief investment strategist at Barometer Capital Management, who points to IT consulting company CGI Group (CGI Group Stock Quote, Chart TSX:GIB.A) as a good stock to own.

“One of the things we looked for was when you’ve got a rally off the lows, would the previous leadership reestablish itself,” says Burrows speaking to BNN Bloomberg on Thursday. “If you’re headed into a recession, you’re going to get defensive groups leading and that’s not the case. Technology has clearly led off the bottom and that includes service companies like CGI.”

After close to a decade of gains, CGI’s share price faltered last fall, as did most names in the tech sector, but the stock still managed an impressive return of 22 per cent for 2018. And GIB.A has continued to impress so far in 2019, too, hitting a new high of $89.42 earlier this week.

Burrows argues there’s still a lot of room for CGI to grow.

“Companies will continue to spend on IT development. The industry is growing at between five and six per cent, so roughly twice the growth rate of the economy,” he says.

“CGI has been really good at making acquisitions, digesting them and continuing on. They’re now in a position where they could make another acquisition. They’ve got a very strong balance sheet, so we watch for potential catalysts there,” he says.

CGI reported its first quarter fiscal 2019 earnings on January 30, featuring revenue of $2.96 billion, a 5.2 per cent year-over-year increase, and Adjusted EBIT of $439.2 million, a 7.5 per cent year-over-year increase. Both numbers were in line with analysts’ estimates for the quarter.

“We are off to a good start in fiscal 2019, as our profitable growth strategy delivered strong first quarter results,” said George D. Schindler, President and CEO, in a press release. “I am encouraged by the broad-based growth we are experiencing across all regions, accelerated by our recent metro market mergers.”