Headlines surrounding the stance taken by leadership at Constellation Software Inc. (TSX:CSU) to retreat from providing excessive forward guidance has been met by mixed reviews from investors. Some, including myself, who believe that market participants have for too long focused on the minutia of the wording of shareholder letters or small earnings misses or beats, have argued that Wall Street and Bay Street firms have placed too much energy on generating short-term results at the expense of the long-term strategic plans they should be focusing on which could be linked to at least some of the anemic economic growth we have seen in recent years.
Constellation Software has decided it would be in the best interest of its investors to forego its shareholder letters and quarterly earnings conference calls, deciding that rather than spelling out where the company is headed, it will focus on building a strong portfolio of software companies from which investors will benefit over the long haul.
Constellation’s business model is one in which the firm acquires underperforming software companies and turns them around, injecting capital and expertise to make such companies thrive. The firm has been incredibly successful, due in part to an excellent management team which has driven results for years.
I believe most tech and software valuations are far too high to be considered reasonable investments, and the company’s CEO has been quoted as saying he believes the same, noting he may look elsewhere for value in the future. This is perhaps one of the most well-run software companies out there with a management team that knows what it is doing. In that regard, in the Canadian tech space, I would recommend investors take a look at Constellation if they haven’t already.
Invest wisely, my friends.
Tech Insider
