BNN - Monday, May 27, 2024 - 01:00 p.m. (ET) - Segment #8

>> Andrew: we have reloy in chilliwack, bc. Go ahead, please. >> Caller: good afternoon, afternoon. I am curious about palo alto. They were doing great. Security seems quite an issue these days so I would like your thoughts on it, please. >> Andrew: thank you. >> Great question. We used to own checkpoint, chkp which is also in this space and so we looked at palo alto. We also looked at fortinet. Both palleto alto and fortinet are strong businesses. We actually think that they are the market leaders in the space and they were taking market share away from palo -- from checkpoint and so we decided to sell our position in checkpoint for that reason. Palo alto. >>> The challenge is that palo alto and fortinet the competition is really strong in this industry and when you have sort of heady competition that's good for the consumer but it may not also be good for the businesses in that space. Palo alto at 46 times earnings is really expensive. The amount of growth that they need to continue to generate to be able to justify that valuation is substantial and probably would -- not probably it. Would certainly keep us away. >>> So I would encourage the caller to look at checkpoint software, to look at fortinet, to look at palo alto and to maybe look at the industry as a whole rather than looking at one player and decide if that's a space that they want to be involved with. Some of the up side of this space is that once a customer generally will subscribe to the service they are sticky. So their switching costs can be quite high. We do like that aspect of the business. So I would say we are neutral on it and the valuation would certainly keep us on the sidelines at this time. >> Andrew: okay. Ryan is calling from montreal. Go ahead, ryan, please. >> Caller: good afternoon. Topicus, toi. Are you still in favour of that stock and also would you have a favourite between toi and propel, p -- with a rl which is I think is part of the same family. Is there a favourite that you have. >> Andrew: topicus a spin-off from constellation. Propel holdings not related as far as I know. Carry on. >> No, not related. I suspect he is probably asking about lumine which is also another spin-off from constellation. So I have been on the record here before where we took topicus -- so we own constellation. It's our largest holding. Excellent company. Very well run. And they did -- they have done two spinouts. They spun out top canuck in 2021 and I believe lumine in 2022. We decided at the time to sell topicus and lumine and simply take the proceeds and preinvest back into the mothership so to speak so into constellation software and we did that for a number of reasons. Number one, constellation software still owns topicus and lumine. I believe they have a 60% don't quote me on this but a 60% ownership in bet. So when you own constellation software you still own shares in lumine and topicus. We also did it from a simplicity standpoint. So rather than us analyzing three businesses topicus, lumine and constellation we now analyse contest and we own 27 businesses so there is plenty of work for to us do. So one of our sort of fill physical here at hillside is to philosophies is is to keep things simple. That matches up with our simplicity philosophy. And then lastly we also think that constellation will do further spin-offs in the future and of course you will only benefit from further spinouts if you own shares in constellation. We think that a time where topicus or lumine might do a spinout could could be 10, 15, 20 years down the road. We decided to sell topicus and lumine. Constellation trades at $3800 a share. And that's an expensive -- I should say an expensive price. That's a high price especially if you don't have much money. My four kids collect bottles and cans and they can't afford a share of share of constellation software. Their largest holding is topicus. They also own kak ac awe and fever tree and calnex for full disclosure. [ audio interruption ] in the del vicario family. >> Andrew: okay. We are -- I think we lost jason there briefly. We will have a look at his top picks coming up. [ ] In an ever changing market, invest in the essentials because there was always a need for multi residential, warehousing and logistics,

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interesting business. I think it still flies under the radar for many people. Maybe it's got a bit of an awkward name with the french alimentation couch-tard. They started in 1982 with one convenience store in laval. They have now grown to something like 14, 15,000 convenience stores across the world. They have got excellent operations in europe, canada, the U.S. as well as asia. The business is still quite fragmented so they sill see a long runway to be able to do acquisitions. And this is just a really great example of mirroring the operational excellence so they are wonderful operators when they buy convenience store location. They are able to add a lot of economies of scale and improve the operations of those businesses. With capital allocation. So they have shown a wonderfully at being able to allocate capital well. [ audio interruption ] for many years to come. >> Andrew: okay. You are sticking with that one. A it. D. >>> Tobe eela which is a security, anti-spam software player in japan? >> Yes, so speaking of competition tobila doesn't have much competition which of course we like. We will see that over the long-term their stock price has trended down which if we remember from earlier in the show we she as a good thing. The stock is now below 15 times western alienation over a 2% dividend yield. Ticks many of our boxes founder-run founder-owned. No debt. High and consistent returns on invested capital. And we think that there is quite a significant barrier to entry for them or for competitors to come in and eat their lunch. They have 15 million users. They have a database that they built up over years. So when a user or they also have connection with the national police in japan when a new spam number or email address has been identified that goes into the database and then of course it benefits everybody else within the network so that they will know if they are approached by one of these fraudsters that it is for certainly a fraud call or fraud sms.

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