Buy OpenText on dips, this portfolio manager says

So far in 2019, the technology sector has been a market standout, with Canadian companies like Constellation Software and Descartes Systems posting gains of 30 per cent or more.

Waterloo-based software and services company OpenText (OpenText Stock Quote, Chart TSX:OTEX) has been a winner, too, rising more than 14 per cent year-to-date. And while the stock has been a consistent gainer over the years, it’d be wise for investors to wait for a pullback before jumping in, says portfolio manager Bruce Campbell.

“It’s one of the Canadian tech companies that’s big enough and liquid enough to buy [other companies],” says Campbell of Campbell, Lee & Ross, to BNN Bloomberg on Tuesday. “They’re a serial acquirer but they’re good at it, often in Europe but in North America as well.”

“With some bumps, it has tended to go higher,” he says. “We don’t own it. We were hoping for a dip below $40. It didn’t quite get there and now it has moved a bit, so for us, we would wait for a pullback. Probably to C$45 now, not C$40, is where an entry point would be.”

OTEX has seen substantial growth over the last five years, where the stock has gone from the low C$14.00 range in early 2013 to a high of C$51.98 hit last July. The stock is currently trading in the low C$51.00 range.

The company has kept up the pace in terms of acquisitions, closing in December on its purchase of cloud company Liaison Technologies for $310 million and then buying up legal document company Catalyst Repository Systems in January for $75 million. (All figures in US dollars unless where noted otherwise.)

OpenText’s last earnings report came on January 31 where it posted revenue of $735 million, a 0.1 per cent year-over-year increase, and Adjusted EBITDA of $308 million, a 6.1 per cent year-over-year growth rate. On earnings, analysts were expecting $0.70 per share, which the company beat with an EPS of $0.80 per share.