Are you looking to buy some tech stock at their dip? Before you consider purchasing the legal practice management software provider Dye & Durham (TSX:DND), you should know a few things. The company has a good software Unity platform and is seeing steady growth. That is why I have been bullish on the stock. It also gave good returns when brought at the dip. The stock price surged 70% between the June low and October peak. So, short-term investors made some good bucks on it.
However, the party seems to be in jeopardy.
Two things you should know about Dye & Durham
Management considers a sale: The company’s management is considering options like selling the Company, merging, divestiture of assets, or other strategic transactions. The acquirer is considering an acquisition. It has been conducting a strategic review on which of the options would unlock value for shareholders. However, it has paused the review until December amid activist shareholder situation.
This is not the first time DND has considered going private. In May 2021, a management-led shareholder group made an offer to buy the company for $50.5, a 23% premium from the then trading price. However, the management didn’t go with the offer and stayed on the stock exchange.
Activist shareholders: Engine Capital has been actively sending notices to Dye & Durham to get their nomination on the tech company’s board. After months of ignoring their notice, DND has finally accepted it.
Both things could alter the course for Dye & Durham shareholders.
Should you buy Dye & Durham stock?
In light of the current developments, it is better to have a wait-and-watch approach. Once there is clarity on the situation and you are assured that Dye & Durham stock will continue to trade on the TSX, you can buy it.
A similar case happened with the payments platform Nuvei. The company had good potential, and the stock was a good short-term returns generator. However, it was acquired. Both these stocks launched their Initial public offering in the 2021 tech boom to raise some equity capital in a bull market. However, publicly listed companies have many procedures and disclosures that restrict the management from making aggressive decisions.
Buy this ETF instead
Tech stocks have the potential to generate growth and finding an undervalued one is tough. Instead, you could take the ETF route and buy units of iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT). This ETF has a 25% holding in Constellation Software, the acquirer of small software companies.
The problem with this stock is you have to shell out a whopping $4,450 to buy just one share. If you don’t have that kind of money, you can buy XIT ETF and get exposure to Constellation Software and other tech stocks. The ETF has surged almost 100% since January 2023. There is a management fee of 0.55% but the 18% average annual growth it has given in 10 years is a good reward.
While you can continue buying other tech stocks you are bullish on, consider making this ETF a part of your core portfolio with a monthly investment of $200.
