BROKERS’ NOTES: Buy Constellation Software, sell thermal coal miners
Seleho Tsatsi of Anchor Capital on what the smart money is doing
Seleho Tsatsi, equity analyst at Anchor Capital
Buy: Constellation Software
Constellation Software is a Canadian-domiciled holding company of several software businesses. Many of its underlying businesses provide mission-critical software to their large customer base. These companies include Volaris Group, Harris Computer Systems and Vela Software which supply software to the defence, health care, education, mining, aerospace and financial services sectors. Constellation is an acquisitive business. In addition, it is an excellent capital allocator, which we like.
Sell: Thermal coal miners
Since my last recommendation the price of thermal coal has declined even more, with some miners selling their product for less than $100 a ton. This is due to the normalisation of coal prices which, not too long ago, were north of $300/t. The normalisation of thermal coal prices has a huge effect on the profitability of miners, as mining is a business where a large chunk of costs is fixed. So, it isn’t easy for these companies to adjust quickly to their new price reality.
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