Investors looking for a long-term play in the tech sector should be buying logistics company Descartes Systems Group (Descartes Systems Group Stock Quote, Chart TSX:DSG), says Michael Decter of LDIC Inc, who claims that over the years the serial acquirer has proven itself to be strategic-minded in its growth plans.
“Hold it for the long-term, that would be my answer,” says Decter, CEO and chief investment officer for LDIC, to BNN Bloomberg on Monday.
“There are companies that do roll-ups, that go out and buy up a lot of similar companies, and we don’t like those. We like consolidators. The difference in our mind is that a consolidator is someone who has a vision, they have a platform, and when they buy something, it makes the whole business stronger. It isn’t just like, ‘I’ve got one taxi cab and I’m going to buy two and three and four.’ It’s really got some deeper dynamic and profitability to it,” he says.
Descartes’ run during the past half-decade has been exemplary, with the stock rising 237 per cent since April of 2014. Like the rest of the tech sector, DSG stumbled over the last quarter of 2018 but has picked up the pace to being 2019. The stock currently sits up 41 per cent year-to-date.
“Descartes got into the business of helping people with shipping and customs forms. And so if you look at them, they’ve been buying more functionality,” Decter says. “They’ll clear your shipment but they’ll also arrange freight forwarding. They’ve also expanded geographically — they used to do this in North America and then Europe and now Australia. So they’ve just grown this business.”
“They do two or three acquisitions a year and they’re very strategic, mostly tuck-unders,” he says. “Very quietly it has become a very strong company and worth owning for the long haul.”
Descartes last reported its earnings on March 7 when it posted better than expected fiscal fourth quarter results, coming in with revenue and Adjusted EBITDA of US$74 million and US$22 million, respectively.