Time to Buy Constellation Software?

If you remember back when it was New Year’s resolution time, mine was to do less. It’s because we know emotion and the wrong psychology destroy most investments. It’s not the companies we invest in; it’s the urgency we bring, or the response to the crowd noise that does us in. We buy high, sell low, or both. We jump in when real estate seems to be going to the sky, only to watch it quickly slide back down to reality.

I don’t want to be part of that. I am also engaging in some serious training of “doing less”. I realized the other day, as I got off the treadmill and prepared to write this letter to you, that I’m part of that problem.

By sending you this letter weekly, I’m likely getting you charged up. You don’t need that. You need a basic set of investments that you believe in and leave them alone.

Checking once a month is fine, once every 3 months is even better when the quarterly reports are published. Once a year is likely even better than that.

So, in keeping with my New Year’s resolution, I’m going to publish this letter once a month on a Monday instead of a Sunday. Most of you take weekends off, unless you are an entrepreneur, a farmer, or running a business that needs you 24/7. If that is you, a weekly newsletter wouldn’t help you either.

Because I’ll be working on it for a while before it is published, expect more to read. You should be able to finish it with a coffee or tea, then leave it alone and your investments for at least 4 weeks.

I know that some of you will unsubscribe because you don’t like this change, and that is fine. I’m not out to please everyone. It is what it is. If you decide to read on, you’ll find a free link to our book “What Grandpa Learned from His Honeybees: The Little Book to Be Smart with Your Money and Help the Environment.” If you have a child or grandchild, send them the link; it’s free. If you haven’t read it, there is now no excuse. Download and read it before the next April letter. Bee well. Hank

Should I buy Constellation Software?

The darling of companies, a mini software Berkshire, Constellation has been growing by acquiring small software companies that are in niche markets. Often, the companies operate in areas with a high moat, making it hard for others, including AI, to disrupt. Most now have AI as part of their structure, but that doesn’t seem to matter. Constellation went from just under $5,000 a share a year ago to just $2,459 now. That’s about a 50% hair cut. I’ve put the company through the Askhank.money paces with some ideas at the end. What do you think?

This information is for Educational Purposes only.
Do not make portfolio changes without speaking with your financial advisor.
I am not a financial advisor.

✅ Hank Protocol Initialized — Back-Check Enabled — Price Confirmed: $2,459

All figures below sourced from audited filings:
- 2024 Annual Report
- 2023 Annual Report
- 2025 Interim (for trend context only)
- 2011 Ask Hank Back Check (knowledge base)

All numbers USD unless stated.

CONSTELLATION SOFTWARE (CSU)

Current Share Price: $2,459

1️⃣ 2011 vs 2024 — 13 Year Compounding Record

Revenue: 2011 ~ $447M | 2024 $10,066M | CAGR ~27%
Net Income (Common): 2011 ~ $92M | 2024 $731M | CAGR ~17%
EPS: 2011 ~$4.40 | 2024 $34.48 | CAGR ~17%
Operating Cash Flow: 2011 ~ $150M | 2024 $2,196M | CAGR ~23%
Book Value: 2011 ~ $370M | 2024 $2,919M | CAGR ~17%

What changed?
- 2011: niche vertical software consolidator
- 2024: 100+ vertical markets globally
- Capital allocation machine scaled 20x

2️⃣ 2024 Financial Snapshot (Audited)

Revenue: $10.07B
Net income to common: $731M
EPS: $34.48
Operating Cash Flow: $2.20B
Amortization: $1.04B
Total Debt (recourse + non-recourse): ~ $3.33B

Shares outstanding ≈ 21.2M

3️⃣ Required Hank Metrics

Price-to-Book (P/B)

Book value attributable to common: $2,919M
Book value per share ≈ $138
P/B ≈ 17.8x

Hank Cap Rate (Cash Flow Yield)

Operating cash flow: $2,196M
Maintenance reality adjustment (conservative haircut): $400M
Adjusted Owner Cash Flow ≈ $1.8B
Per share ≈ $85
Hank Cap Rate ≈ 3.5%
Payback ≈ 28–30 years at current level (before growth)

Buyback Effect ≈ 0–1%

Dividend Safety: Very high

Payback Years (ROE Method)

ROE ≈ 25%
Payback ≈ 71 years

4️⃣ 10 Hank Rules Scorecard

Hive Must Come First: 9/10
Nature Knows Best: 8/10
Recycle: 8/10
Focus & Efficiency: 9/10
Live in the Right Place: 9/10
Compounding Over Time: 10/10
Capital Allocation Discipline: 10/10
Probability of Success: 8/10
Governance & Feedback: 9/10
Listen to the Buzz: 8/10

Total Score: 88 / 100

5️⃣ Munger Inversion

• Acquisition machine slows
• Large deal risk increases
• Multiple compression
• Regulatory fragmentation
• Management succession risk

6️⃣ Graham View

Graham would not buy at 17–18x book.
Too expensive on an asset basis.

7️⃣ AI / Disruption Risk

Vertical market software
Switching costs high
AI risk is moderate but manageable

8️⃣ Tariff / Trade Sensitivity

Minimal.
Software revenue is recurring and diversified globally.

9️⃣ Hank Nibble Price

At 6% Hank Cap Rate target:
Required cash flow per share = 0.06 × Price
Price ≈ $1,416

Hank Nibble Price: ~$1,400–$1,500

Final Perspective

2011 buyer got:
• 20x revenue growth
• 8x EPS growth
• Massive capital allocation scaling

2024 buyer gets:
• Mature, disciplined acquirer
• Lower starting yield
• Dependence on continued deal flow

Ask Hank™ Back-Check Score
Year: 2011
Company: Constellation Software (CSU)
Data Source: 2011 audited filings (no hindsight data used)

2011 Snapshot (What We Knew Then)

Revenue: ~$447M
Net Income: ~$92M
EPS: ~$4.40
Operating Cash Flow: ~$150M
Debt: modest relative to cash flow
ROE: ~25%+
Acquisition model: decentralized vertical software roll-up
Share price (approx. 2011 range): ~$70–$80

Required 2011 Hank Metrics

Price-to-Book (2011)

Book Value ≈ $370M
Book value per share ≈ ~$17
P/B ≈ 4–5x

Hank Cap Rate

Owner cash flow per share ≈ ~$7
At ~$75 share price:
Hank Cap Rate ≈ 9–10%
Payback ≈ 10–11 years

Buyback Effect: 1/10
Dividend Safety: 9/10

Payback Years (ROE Method)

ROE ≈ 25%
Payback ≈ 18 years

10 Hank Rules — 2011 Scorecard

Hive Must Come First: 10/10
Nature Knows Best: 9/10
Recycle: 9/10
Focus & Efficiency: 9/10
Live in the Right Place: 9/10
Compounding Over Time: 8/10
Capital Allocation Discipline: 10/10
Probability of Success: 8/10
Governance & Feedback: 8/10
Listen to the Buzz: 9/10

Total 2011 Score: 89 / 100

What Happened After?

From ~$75 (2011) to ~$2,459:
~32x capital appreciation
Plus dividends
~30% annualized return range

What Made 2011 Special?

• High starting Hank Cap Rate (~10%)
• High ROE (~25%)
• Long runway of small vertical acquisitions
• Low market attention
• Management obsessed with capital allocation

Ask Hank™ Verdict (2011)

Status: Full Position — Not Just a Nibble

Because:
• Cap Rate > 8%
• ROE > 20%
• Strong capital allocator
• Durable recurring revenue

So, this is a lot of stuff. Basically, it’s a different company than it was in 2011. But interestingly, the Hank Score is almost the same, but for different reasons.

I respect the nibble price here and won’t be a buyer unless it hits $1,500. We have quite a way to go and some more bad news is needed.

While I know I’ve talked about creating my own ETF to avoid fees, what if I wanted a total hands-off ETF or Mutual Fund so I could just set it and forget it? What would I do?

I asked AskHank.money to find me some funds. The result is below.  I’m not going to buy any, just wanted to see what was out there. Fees, even the smallest number, are something I can’t live with. I need to watch and control how my money is invested. Here is the analysis.

Ask Hank™ ETF Checker — VCN (Vanguard FTSE Canada All Cap Index ETF)

Asset Class: Broad Canadian Equity Index ETF
Index Tracked: FTSE Canada All Cap Domestic Index
Ticker: VCN.TO
Exchange: Toronto Stock Exchange
Currency: CAD
Investment Assumption: $10,000
Commissions: $0
Return Type: Total Return (Distributions Reinvested)

Fees & Cost

MER: 0.05%
Fee Colour: 🟢 Green (≤0.25%)
Annual Cost on $10,000: ~$5

Top Holdings (Approximate)

Royal Bank of Canada – 7.25%
Toronto-Dominion Bank – 4.88%
Shopify – 4.87%
Enbridge – 3.27%
Bank of Montreal – 3.01%
Bank of Nova Scotia – 2.96%
Agnico Eagle Mines – 2.91%
CIBC – 2.67%
Barrick Gold – 2.38%

Performance (Total Return, CAGR)

1-Year: 27.12%
3-Year: 18.94%
5-Year: 16.53%
10-Year: 12.75%

Growth of $10,000 (Illustrative)

10 Years @ 12.75% CAGR: ~$35,477
5 Years @ 16.53% CAGR: ~$22,285
3 Years @ 18.94% CAGR: ~$16,735
1 Year @ 27.12% CAGR: ~$12,712

Dividend Information

Trailing Yield: ~2.26%
Distribution Frequency: Quarterly

Liquidity & Assets

Assets Under Management: ~$13B+
Average Daily Volume: Moderate to High
Units Outstanding: ~207M+

Summary

Fee Tier: 🟢 Green
Broad Canadian Equity Exposure
Market-Cap Weighted Structure
Total Return Performance Strong Across Measured Periods
$10,000 Invested 10 Years Ago ≈ 3.5x Growth

This information is for Educational Purposes only.
Do not make portfolio changes without speaking with your financial advisor.
I am not a financial advisor.

Ask Hank™ ETF Checker — XIC (iShares Core S&P/TSX Capped Composite Index ETF)

Asset Class: Broad Canadian Equity Index ETF
Index Tracked: S&P/TSX Capped Composite Index
Ticker: XIC.TO
Exchange: Toronto Stock Exchange
Currency: CAD
Investment Assumption: $10,000
Commissions: $0
Return Type: Total Return (Distributions Reinvested)

Fees & Cost

MER: 0.06%
Fee Colour: 🟢 Green (≤0.25%)
Annual Cost on $10,000: ~$6

Top Holdings (Approximate)

Royal Bank of Canada – 6.86%
Toronto-Dominion Bank – 4.67%
Shopify – 4.25%
Enbridge – 3.18%
Agnico Eagle Mines – 3.17%
Brookfield Corp – 2.93%
Bank of Montreal – 2.90%
Bank of Nova Scotia – 2.69%
CIBC – 2.57%
Canadian Natural Resources – 2.48%

Performance (Total Return, CAGR)

1-Year: 28.2%
3-Year: 18.8%
5-Year: 16.3%
10-Year: 12.85%

Growth of $10,000 (Illustrative)

10 Years @ 12.85% CAGR: ~$36,062
5 Years @ 16.3% CAGR: ~$21,569
3 Years @ 18.8% CAGR: ~$16,607
1 Year @ 28.2% CAGR: ~$12,820

Dividend Information

Trailing Yield: ~2.08%
Distribution Frequency: Quarterly

Liquidity & Assets

Assets Under Management: ~$26B+
Units Outstanding: ~493M+

Summary

Fee Tier: 🟢 Green
Broad Canadian Equity Exposure
Tracks S&P/TSX Capped Composite Index
Strong Long-Term Total Return Performance
$10,000 Invested 10 Years Ago ≈ 3.6x Growth
Ask Hank™ ETF Checker — ZCN (BMO S&P/TSX Capped Composite Index ETF)

Asset Class: Broad Canadian Equity Index ETF
Index Tracked: S&P/TSX Capped Composite Index
Ticker: ZCN.TO
Exchange: Toronto Stock Exchange
Currency: CAD
Investment Assumption: $10,000
Commissions: $0
Return Type: Total Return (Distributions Reinvested)

Fees & Cost

MER: 0.06%
Fee Colour: 🟢 Green (≤0.25%)
Annual Cost on $10,000: ~$6

Top Holdings (Approximate)

Royal Bank of Canada – ~6.8%
Toronto-Dominion Bank – ~4.7%
Shopify – ~4.2%
Enbridge – ~3.2%
Agnico Eagle Mines – ~3.1%
Brookfield Corp – ~2.9%
Bank of Montreal – ~2.9%
Bank of Nova Scotia – ~2.7%
CIBC – ~2.6%
Canadian Natural Resources – ~2.5%

Performance (Total Return, CAGR)

1-Year: ~30%
3-Year: ~18.8%
5-Year: ~16.3%
10-Year: ~13.2%

Growth of $10,000 (Illustrative)

10 Years @ 13.2% CAGR: ~$36,502
5 Years @ 16.3% CAGR: ~$21,569
3 Years @ 18.8% CAGR: ~$16,607
1 Year @ 30% CAGR: ~$13,000

Dividend Information

Trailing Yield: ~2.1–2.2%
Distribution Frequency: Quarterly

Liquidity & Assets

Assets Under Management: Multi-Billion CAD Range
Units Outstanding: ~400M+

Summary

Fee Tier: 🟢 Green
Broad Canadian Equity Exposure
Tracks S&P/TSX Capped Composite Index
Strong Long-Term Total Return Performance
$10,000 Invested 10 Years Ago ≈ 3.6x Growth

So If I were under the age of 50 today, and didn’t want to:

1. Beat the regular market returns.

2. Read and learn weekly about value investing.

3. Have the time to do the above.

4. Be stressed or worried about the daily hype.

5. Take control of my money.

I would then set up a regular purchase plan for buying equal weights of the 3 above funds. I would do it monthly until the time arrived when I wanted to become a serious equity investor.

On the real estate market side, lots of news of frozen or dropping home values across Canada. With condos, lots of news about people having to take possession of properties at $300,000 or more off the value. If you have read and listened to past podcasts, I’ve always stated that condos are not an investment. You couldn’t pay me to own one.

To live in, let’s use this example.

In Toronto, you can rent a two-bedroom unit for $2,450. Let’s assume that instead you choose to buy a condo “on sale” for $650,000. It is not an investment, but you want to live in it.

Let’s assume you have the $650,000 cash.

Condo fees are $6,500 a year. Taxes are $4,800. Insurance $2,300. There are some leaks in the building, so a $5,000 annual fee is to make up the reserve shortfall. If you had invested $650,000 at a conservative 5% return, you would have lost $32,500 in income. You must calculate the lost opportunity as a cost, as you would a mortgage payment. The monthly cost of paying cash for this condo is $4,258.

I’d rent and invest the difference. What would you do?

Finally, land banking is something I’ve discussed previously. The description is below. I would land bank if I were renting an apartment somewhere in Canada, where affordable land is not available. Here’s the idea.