April 1, 2012 Comments

In about two weeks Shaw Communications will release its Q2 earnings. No doubt they will report some loss of basic cable customers to Telus. On the other hand they will likely gain customers in total when phone and internet is considered. I would be surprised if they don’t report decent earnings growth. I suspect more people will have rented movies online from Shaw. Many movie rental stores have closed recently. Maybe the tech-savvy are downloading movies for free or at minimal cost but I suspect a lot of people will be renting movies from Shaw. And that has to be a high-margin business. I may add to my position in Shaw in anticipation of the earnings release.

Constellation Software returns to the list above rated (lower) Strong Buy at $89.35. I will likely buy some shares tomorrow. As noted below it may be possible to buy at $87.50.

Here is a bit of history on regarding our analysis of Constellation. This company was first introduced to our list on February 4, 2011 rated (lower) Strong Buy at $51.40. It’s price then rose unexpectedly rapidly to about $70 gaining 35% in just a few months. Then, in April 2011 it was announced that the company was looking to be bought out. This complicated matters as far as analysing the stock was concerned as its price then might be be “event driven” – more related to the buyout than the earnings.  Due to the pending buyout I did not further analyse it in 2011. At the end of 2011 (se January 2, 2012) I removed it (and several other companies) from the list due to the analysis being out of date. I stated then that ” I don’t think I would consider any of these (removed companies) to be Sells. If I held them I would be in no big hurry to sell. Then again, I have not looked at them recently.”  In March 2012, the company announced that it was not longer looking to sell itself. At this time the stock is up 74% since February 4, 2011.

The company had stellar earnings in 2011 and now appears to be worth considerably more than it looked to be worth a year ago. Company management appears to have identified a consistently profitable way to grow by acquisition. Their approach appears to be highly rational and credible. The only nagging concern would be the question of why OMERs private equity was eager to reduce its position selling shares to the public at $87.50 and receiving only $84 after fees payable. Another large institutional holder also reduced its position recently at $84. The share price recently dropped $10 on the news that OMERs would offer shares to the public at $87.50.

Overall I like the company and will likely buy some shares tomorrow. However, since the closing of the secondary offering at $87.50 was to be tomorrow Monday April 2, there may be an opportunity to buy these at no more that $87.50.