in Constellation Software, cost of capital, Mark Leonard, rate of return, software

3 Best Reads of this Week

Please bear with me this week. There’s nothing much but commentary about Constellation Software’s latest shareholder letter. Besides my own reaction to it, it’s imperative that you read others’ opinion too. Enjoy.


“If CSU [Constellation Software] returned cash to shareholders, instead of pursuing new initiatives, that cash would would earn CSU’s cost of capital at 7.5-8.0% (assuming all investors can earn that return). In order for new initiatives to be accretive, CSU needs to earn in excess of that.”

CSU:TSX, The 10th Man

“Ideally, as an investor, you want a firm that reinvests as much of its profits as possible at high rates of return. Any payout to you is a leak in that compounding cycle.

Note, this only applies to those rare and wonderful businesses that can mix that classic financial martini of 100 baggerdom. A lot of mediocre businesses with marginal returns and no reinvestment opportunities should pay dividends. But I’m not interested in those kinds of opportunities. I’m interested in businesses like Constellation Software.”

Cutting Dividends to Create Value, Chris Mayer

“When I saw that there was a new letter [by Constellation Software], the first one since 2017, it felt a bit like a mix of Xmas and a sighting of Halley’s Comet”

92: Mark Leonard’s 2021 Letter!…, Liberty’s Highlights