Caisse de Dépôt Likes These 3 Stocks: Should You?

A recent news announcement from Caisse de dépôt et placement du Québec, one of the country’s biggest pension fund managers, about its newest investment, Stingray Digital Group Inc. (TSX:RAY.A)(TSX:RAY.B), got me thinking about two other Quebec stocks it also likes.

| More on:
The Motley Fool

Caisse de dépôt et placement du Québec announced June 20 that it was buying two million subordinate voting shares of Montréal-based Stingray Digital Group Inc. (TSX:RAY.A)(TSX:RAY.B) for $14.2 million. It’s not a big investment by the pension fund manager’s standards—it manages $248 billion in assets for pension funds in Québec. The move increased its ownership stake in the digital music and video service by more than 500%, suggesting that now is the time to buy its stock.

Montréal-based Stingray delivered outstanding fourth-quarter and fiscal 2016 results.

Revenues in its fourth quarter increased 31% to $25.7 million, while generating adjusted EBITDA of $8.2 million, a 6.3% increase over Q1 2015. On the year, Stingray’s revenues increased 27% to a record $89.9 million and an adjusted EBITDA of $31.0 million, which is also a record. The best part of its results are its recurring revenues, which increased 22.1% in fiscal 2016 to $77.6 million, or 86% of its overall revenue.

Businesses kill for this kind of consistent revenue generation. Investors seek out companies like this because they’re a delight to own. That’s why Caisse upped its stake. However, most investors will probably shy away from Stingray because of its size. If you can look beyond its tiny market cap of less than $300 million, Caisse’s endorsement is meaningful.

Who else does Caisse like that’s based in Québec? Two large caps come to mind.

The first is Alimentation Couche-Tard Inc. (TSX:ATD.B). Caisse owns almost 27 million shares in the convenience store operator. Those holdings are currently valued at $1.4 billion–one of the few investments among the hundreds of holdings listed in its 2015 annual report over the billion-dollar mark.

Why do they like it?

Probably for the same reasons I do. It knows how to buy, integrate, and operate convenience stores in all parts of the world. More importantly, it’s one of the best at quickly deleveraging after big M&A deals, and that’s a big plus for investors concerned about debt. Alain Bouchard and the rest of the team in Montreal know how to operate this particular type of business better than almost anyone on the planet.

Recently, I wrote an article about how its stock is down year-to-date and quite possibly headed for its first annual decline since 2008, but its ability to integrate acquisitions, along with its move to one brand—Circle K—around the world should provide it with even more synergies than it already possesses. While down, it’s definitely not out.

The other large cap Caisse likes is CGI Group, Inc. (TSX:GIB.A)(NYSE:GIB), a $16 billion company that plies its trade in the highly competitive IT field. Critically important is the fact CGI also happens to be the pension fund manager’s biggest holding at $3.2 billion. That’s an endorsement of the Montréal-based company because the next largest position is around $1.8 billion, or almost half CGI.

I don’t know a lot about CGI, which should indicate my level of ignorance when it comes to technology stocks.

However, Fool contributor Karen Thomas does. Recently, Thomas highlighted three good reasons to buy CGI’s stock. She feels the company has barely scratched the surface in Asia, where its second-quarter revenue increased by 11.6%. With Asia accounting for just 5% of the company’s overall revenue in Q2, investors can expect to hear more from this segment of its business.

Add to this improving margins, organic growth, a bigger backlog and a strong outlook for the rest of fiscal 2016, and it looks as though Caisse will be richly rewarded for its heavy weighting in CGI.

These are but three of the stocks Caisse likes. Have a look at its 2015 annual report to find more gems in their massive portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Will Ashworth has no position in any stocks mentioned. CGI and Couche-Tard are recommendations of Stock Advisor Canada.

More on Investing

Canadian dollars in a magnifying glass
Dividend Stocks

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now

Are you looking for great income stocks? Here's a trio of high-yield dividend stocks that pay insane yields right now.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Bank Stocks

Best Stock to Buy Right Now: TD Bank or Manulife Financial?

Manulife continues to see momentum in its business and stock price, while TD Bank stock remains down and out.

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy With $1,000 Right Now

These three Canadian tech stocks could be among the best growth opportunities in the market right now.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Transform a $5,000 TFSA Into a $50,000 Retirement Nest Egg

The TFSA is a powerful tool that can grow a small investment into a substantial retirement nest egg over time.

Read more »

Canadian Dollars bills
Metals and Mining Stocks

2 Cheap Canadian Stocks Under $20 to Buy This November

Cheap TSX stocks such as Endeavour Silver are trading at an attractive valuation in November 2024.

Read more »

happy woman throws cash
Tech Stocks

3 Growth Stocks That Could Be Long-Term Wealth Creators

These three growth stocks aim to grow their financials at a higher rate than the industry average, thus delivering superior…

Read more »

how to save money
Bank Stocks

This 5.9% Dividend Stock Pays Cash Every Month

First National Financial (TSX:FN) has a 5.9% yielding dividend that is paid out monthly.

Read more »

gift is bigger than the other
Investing

The Best Canadian Stocks to Buy With $5,000

These Canadian companies have solid growth prospects and the ability to deliver profitable growth even at a large scale.

Read more »