CSU trade ideas
CSU LongThis week CSU went back down to test the resistance level at 2179.79 ish. Today we went below the resistance level and then back up and closed on the high above yesterday's high on very decent volume. On the Weis Wave we can see some good strength in the background. Text book spring if you ask me.
My target is at the top of the channel line at 2332. My stop is one cent below today's low.
Composite Symbols & Diversified Portfolio with Just Two Stocks?Here I use one of the more simple TV tools to show a powerful combination of two stocks. The tool is adding symbols together to make a composite symbol. As a bonus, it also shows what I think is a great combo of two companies that, together, make for one heck of a portfolio.
In this chart I combine CSU in Canada with BRK.B in the USA. But first CSU needs to be multiplied by the CADUSD cross rate to compare apples to apples. You can add up to 10 symbols this way to chart a portfolio. One can also multiply a position size to each symbol to more accurately show your portfolio as many other have previously shown. Again, I am not inventing anything new here.
The resulting chart show two of my favorites: Constellation Software - a company that is essentially a VC with over 500 well chosen tech companies folded into it and Berkshire Hathaway - the ultimate "bricks and mortar" conglomerate.
Both of these companies boast a great history of carefully choosing long term business acquisitions along with a relatively hands off approach and steady growth. Unlike ETF's or mutual funds, there is no extra MER dragging down performance and almost no tax surprises from any built in capital gain, interest or dividend distributions. BRK.B never pays a divided and CSU has recently stated that it will attempt start to make some larger acquisitions - using it's cash to do the same. It currently pays only a small dividend and instead reinvests most of it's earnings as does BRK.B with all of it's earnings. The result is very tax efficient investments that let experienced managers like Warren Buffet, re-employ your earnings to further compound your potential gains. The resulting chart shows incredible performance at an average of 21.14% per year over the 16.21 years we have data on - all in a two company portfolio that boasts hundreds of companies under their umbrella in a diversified portfolio spread among huge industrial, finance, insurance and software industries - All in a relatively low volatility portfolio.
Two Important Notes:
A note about dividends: I love that these companies pay little or no dividends! Understand that the most important measure in my mind - outside of risk - is TOTAL RETURN. If your investment increases by 10% or you get a 2% dividend and 8% gain - you get the same 10% return. However, dividends are typically taxed at a less favorable rate to capital gains unless they are in a retirement plan so that dividends actually can eat into your after tax net profits. You want income? Sell a little bit off on a regular basis and only pay capital gains taxes that are typically taxed at a lower rate outside of registered plans like IRA's or RRSP's. Even cross boarder tax issues are better with this arrangement as dividends between Canada and the US are often treated as income in non-registered plans when they come from outside the country. Citizens of either country living in the other country also escape potential double taxation this way. (Tax laws do change so have your advisor or accountant verify this for your particular situation).
A note about the high price of both of these stocks: Don't worry about it! $10,000 invested is $10,000 invested. It does not matter if it is in 5 shares @ $2000 per share or 10,000 shares @ $1 per share. More and more brokers are now allowing the purchase of "Fractional Shares" which enables the investor to put only say $200 into buying a $2000 stock and low to zero commission rates now offered at many of those same firms make purchasing small numbers of shares or fractions of those shares no different that if you were to trade thousands of shares. Don't let a high price per share scare you away from a good stock.
A Blockbuster Firm that Could Report Blockbuster EarningsCSU, although mostly unknown to retail investors, is one of my top software stocks in the entire market. Not only is it incredibly stable during major corrections on the broader market, but the execution and business plan is excellent. Essentially, they buy smaller businesses and grow them before they get too big and expensive to acquire (so to speak).
While certainly not a cheap price, it is a top stock for EPS growth and hence, capital appreciation. Software is one of the few sectors in the market where a hefty price tag is at-least somewhat justified, unlike other companies that directly sell "things" to consumers.
Based on pure technicals, it appears the market is hinting the earnings call/report tomorrow could be a blockbuster one. If it is, CSU will reach a minimum of 1800.00 by year-end. A strong report tomorrow could give it at-least a 3-5% quick pump.
This is one of the few stocks you want to buy on all pullbacks and keep adding in numbers in your portfolio overtime.
2020 Stock Targets
- Strong report Feb 13: 1800-2000+
- Average report Feb 13: 1750
- Weak report Feb 13: 1600
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Constellation Software: Break-Out; Top Canadian CompanyConstellation Software is the most expensive Canadian stock one can buy and its capital growth has been absolutely incredible. While stock numerical value in itself means nothing, overtime this stock has done beautiful things. My favourite sector in the tech space is software for its capital appreciation, stability and resilience when a market correction happens, as well as, the ability to bounce-back when one does happen.
The question now is, now that CSU has broken-out, where will it go? While its impossible to tell obviously, we can look back in history. In this study we can see 4 or 5 times it rose about 16-18% just prior to the dip before the break-out. In this case I can see CSU reaching well over $1450.00.
Technically speaking, this stock is beginning to squeeze at greater strength everyday and it could go on a bit of a parabolic run. The best sign of an impending short squeeze is when a certain stock or equity rises consistently even as the market and the entire sector falls for a certain period of time.
Overtime this is certainly a company you want to be in on the dips for software exposure even if one's means can only fathom a handful of shares given the price tag.
Another important factor most people overlook when investing is that, the lower the outstanding shares (generally speaking) the better. Higher outstanding shares increases dilution amongst shareholders, decreases EPS and has an increased potential for volatility and short interest when the "big whales" decide to sell. For this reason, during market corrections, the stocks with absurd numbers of outstanding shares in the billions usually tumble the most.
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CSU - Constellation Software - Long ideaI was asked about this chart, I see the long but I would be waiting for a better entry. I see a rising wedge and would be waiting for a break of that pattern typically to the downside. I see price has risen above previous resistance which is now support. This stock is in a nice uptrend, I like sound entries. I see the RSI and MACD are showing bearish divergence. I will be keeping my eye on that support line, or the 200EMA, toss in a daily candle close for confirmation and I think you have a nice long position here.
