CIBC Research says year end tech rally has begun
Paul Lechem has a piece out this morning that will come as encouraging to many in our industry. He sees positive things for the overall tech market in the coming months. Here is a summary:
“The software sector is one of “special situations,” with each company benefiting from its own unique set of market segment trends, opportunities and competitive dynamics. We highlight several special situations that we believe offer appealing fundamental company dynamics as well as attractive valuations: COM DEV (CDV–SO) (satellite components), Emergis (EME–SO) (automated healthcare transaction processing), Cognos (COGN–SO) (business intelligence), and MacDonald Dettwiler (MDA–SO) (online property information). In addition, company-specific issues have resulted in a number of software stocks dropping towards the lower end of their trading ranges, be it due to missed expectations or other disappointments. We note recent sell-offs in MacDonald Dettwiler and CGI (GIB.A–SP) (IT services).
We believe there are two other options for investing in the software sector based on the sector consolidation trend. The first is to play the survivors. The market is in the latter stages of a shakeout, with the strongest companies gaining market share from weaker competitors. The leading, financially healthiest vendors likely to benefit from this consolidation include MacDonald Dettwiler and Open Text (OTEX–SP). Second, play the take-outs. The flip side of this equation is that many smaller companies are unlikely to remain independent entities, but are
valuable for their technology, brand, customers, or internal resources.
Financially viable companies in this group include DataMirror (DMC–SU), Sierra Systems (SSG–SP), and Certicom (CIC–SP).”