Tech stocks have been hammered in 2022 but one name that has bucked the trend is Canadian IT consulting giant CGI Inc (CGI Stock Quote, Charts, News, Analysts, Financials TSX:GIB.A), which is actually in the black for the year so far. And while it’s anyone’s guess how the market will take to technology in the new year, portfolio manager Brian Madden says investors will do well by CGI in the long run, as the company is well-positioned for success in good and not so good macro conditions.
“Boring is beautiful, and that’s not to take anything away from this company,” said Madden, CIO at First Avenue Investment Counsel, who spoke on BNN Bloomberg on Thursday.
“They’re around the world — they’re in eight or nine different operating segments, geographically aligned. There’s a bit of a slowdown emerging in Europe or a hesitation on the part of customers to pull the trigger on big deals, but a lot of this stuff is mission critical and with a lot of it demand is amplified in periods of economic growth because the cost of serve is lower when CGI does it than when a company in-sources or does it with their own resources,” Madden said.
Canada’s largest tech company with a global employee base over 70,000, CGI delivers IT consulting and systems integration services and it has on-site outsourcing solutions along with remote offerings through its many delivery centres in North America, Europe and India.
Madden said it’s CGI’s flexibility that gives them their edge.
“[They] do proximity-based service, meaning a local person is helping you, or it could be near-shoring where you’re in Manhattan and it’s a call centre in Lafayette, Louisiana, or it can be much cheaper if you offshore to India or the Far East. So, that flexibility is good,” he said.
With a market capitalization of about $28 billion, GIB.A didn’t zoom ahead like many tech stocks during the first two years of the pandemic. It more or less made it back to its pre-pandemic highs by the third quarter 2021 and then tailed off again. But the past few months have been exemplary from the stock, which rose from around $102 in mid-September to now around $117.
Madden says there’s more growth ahead to reward investors.
“The shares trade at undemanding multiples, and they continue to roll up and suck in small and mid-size peers and it’s worked for decades,” he said. “We think it’ll continue to work. And the stock price chart validates that they’re doing what they should be doing.”
National Bank Financial recently published a Technology report where it reviewed over two dozen Canadian exchange-listed tech stocks under coverage,...