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

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »

how to save money
Dividend Stocks

Got $1,000? The 3 Best Canadian Stocks to Buy Right Now

If you're looking for some cash flow from your $1,000 investment, these are the ideal investments to make.

Read more »

Data center servers IT workers
Tech Stocks

Better Buy: Shopify Stock or Constellation Software?

Let's dive into whether Shopify (TSX:SHOP) or Constellation Software (TSX:CSU) are the better options for growth investors in this current…

Read more »

Electricity transmission towers with orange glowing wires against night sky
Investing

Fortis Rose 11% in 90 Days, and it’s Still a Good Stock to Buy Now

Here's why Fortis (TSX:FTS) is among the top dividend stocks I think long-term investors want to own in this current…

Read more »

grow money, wealth build
Investing

1 Canadian Growth Stock Poised to Outperform in 2025

Restaurant Brands International (TSX:QSR) is a top growth stock that also has a massive yield and a depressed P/E multiple…

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Valued at a market cap of $55 billion, Imperial Oil pays shareholders a growing dividend yield of 2.4%. Is the…

Read more »

A worker drinks out of a mug in an office.
Investing

Here’s the Average TFSA Balance at Age 34 in Canada

Have you ever wondered how your TFSA stacks up compared to the average Canadian?

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

A Dividend Giant I’d Buy Over BCE Stock Right Now

Don't get sucked in by BCE's 10% dividend -- the stock is a total yield trap. Buy this instead.

Read more »