For much of this year, the stock market has been very rewarding to be a part of. The S&P 500 has already gained more than 8%, and the S&P/TSX has gained about 5%. Given that we’ve only gone through the first quarter, it’s very promising in terms of the kinds of returns investors could see by the end of the year.
However, over the past week, there has been growing pessimism in the market due to a number of reasons. Namely, investors are discouraged by the fact that interest rates haven’t been cut due to lingering effects of high inflation. As a result, we saw stocks continue to fall steadily over the course of the past week.
Some stocks, like Constellation Software (TSX:CSU) saw significant declines on Thursday and Friday. That stock, in particular, dropped more than 3% through those two days. Today, Constellation Software has gained more than 1% (as I write this article), yet the stock still trades a bit lower than where it was to open last Monday. Despite that and the lingering pessimism in the market, I will continue to buy this stock hand over fist in April.
Why will I continue to buy Constellation Software stock?
The simplest way to put it is, Constellation Software is a proven winner. Since its initial public offering, this stock has gained more than 19,700%. Through all its years and all of that success, Constellation Software’s leadership team remains intact.
Mark Leonard, the company’s founder, remains its president. In addition, he continues to show shareholders, through his letters, that Constellation Software is still committed to outpacing growth. In my opinion, as long as Mr. Leonard stays at the head of this company, Constellation Software is an easy addition to any investor’s portfolio.
It should be noted that Constellation Software’s financials also continue to impress. In December 2023, the company reported $2.32 billion in quarterly revenue. That represents a year-over-year growth of about 25.7%. Furthermore, the company’s net income grew by 25% year over year during the same period. Looking at Constellation Software’s total revenue in 2023, we can see a 27% year-over-year increase to $8.41 billion.
What should investors know about Constellation Software stock?
If you aren’t familiar with it, this company acquires vertical market software (VMS) businesses. For much of its history, Constellation Software has focused on small- and medium-sized VMS businesses for acquisition. However, in 2021, the company announced its plans to begin targeting large VMS businesses.
We’ve seen this plan start to come to fruition through a couple of spin-offs that have helped facilitate those large acquisitions.
Although Constellation Software has displayed its expertise in that area, investors should note that it isn’t the only company that does this. There are many “copycat” companies out there that could affect Constellation Software’s business in the future. Mark Leonard even mentioned that fact in one of his most recent shareholder letters. However, I am still very bullish on this company’s success, and you should be, too.
