Pieter Slegers — Adding to Three High-Quality Stocks (Compounding Quality)

One-line take: the month's buy issue, and the first of two February adds to the same two software names. The framing is the split market — "For some companies, Mr. Market is euphoric (Artificial Intelligence) while for other companies, it seems like Mr. Market thinks the world is ending." Constellation Software is bought into "its largest drawdown ever" at 16.2x cash flow against 35x in 2024, with the AI-disruption fear answered not by Slegers but by three quoted community members — the argument being that the vertical-market-software moat is "mission-critical data, complex regulations, deep integration into work processes and high switching costs," not development cost. Visa is bought on a Buffett line — "These stocks don't dip often, but when they do... Take notice" — after a 10% credit-card rate-cap proposal Slegers expects to fail in court; the return is built from disclosed parts (0.8% dividend + 2.3% buyback = 3.1% shareholder yield, plus 12% earnings growth). Topicus gets the cleanest valuation statement in the issue: same price as 2021, double the free cash flow, "It's like buying the same house that cost $200,000 five years ago for $100,000 today."

1. Stocks & names mentioned

All three names are Positive — each is an executed add with a published quantity and limit price. Research legend: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis; Canadian rows point QT/SA at the US OTC symbol. Written post with no timestamps — the At link opens the article.

Stance = how each name is framed in this post. The closing summary reverses the Visa and Topicus amounts relative to the transaction blocks ($20k Visa / $15k Topicus in the blocks; $20k Topicus / $15k Visa in the conclusion) — the transaction blocks are taken as authoritative. Chapters Group is named only inside a quoted third-party comment and is left to the talking points.

2. Talking points

Ticker	Name	Research	View	What he said	At
CSU.TO	Constellation Software	QT · SA · STK · FA	Positive	ADDED $15,000 — order Q 8, limit CAD 2,600. "The best serial acquirer in the world," compounding at +30% a year and a 100-bagger 15 years after its 2006 IPO. "In 2024, investors were willing to pay 35 (!) times the cash flow for Constellation Software. And today? Just 16.2x." Bought into "its largest drawdown ever" on the AI-disruption fear, which he rejects: "I don't believe this." Buffett is invoked directly — "The best time to buy stocks is when there's blood running through the streets."	read ↗
V	Visa Inc.	QT · SA · STK · FA	Positive	ADDED $20,000 — order Q 60, limit $325. The "stock Buffett says you should always buy when its down": "I should have bought Visa and Mastercard. These stocks don't dip often, but when they do... Take notice." Down with Mastercard on Trump's proposed 10% credit-card interest-rate cap — "I think Trump will never be able to push this through in court." "Visa is a pure cash machine. They translate more than 50% (!) of its sales in pure cash." A 0.8% dividend plus a 2.3% annual buyback is a 3.1% shareholder yield; with 12% expected earnings growth "you could expect the stock to double every 5 years." Expected return in the model: 15.9% a year.	read ↗
TOI.V	Topicus.com	QT · SA · STK	Positive	ADDED $15,000 — order Q 180, limit CAD 105. The Constellation spin-off rolling up European vertical market software; "the reason we're adding to Topicus is exactly the same as why we're adding to Constellation Software." The valuation line is the cleanest in the issue: "In 2021, the stock price was at the same level as it is today. The Free Cash Flow has doubled in the meantime… It's like buying the same house that cost $200,000 five years ago for $100,000 today." On AI, Topicus' own framing is quoted approvingly — software shifting from passive "systems of record" to active "systems of action."	read ↗
MA	Mastercard	QT · SA · STK · FA	Neutral	Named only alongside Visa — the other half of the Buffett quote ("I should have bought Visa and Mastercard") and the other name sold off on the proposed 10% credit-card rate cap. No separate thesis or transaction here; it becomes a Buy on the 5 February Buy-Hold-Sell sheet four days later.	read ↗

The split market

"It's like Mr. Market has lost its common sense. For some companies, Mr. Market is euphoric (Artificial Intelligence) while for other companies, it seems like Mr. Market thinks the world is ending."
The frame is not a call on which side is right — it is that dispersion itself is the opportunity: "This is exactly what you want to see as a rational long-term investor."

Teased before named

Each buy is introduced by a clue rather than a ticker: "a company I would love to work for"; "a stock Buffett says you should always buy when its down"; "trades at its cheapest valuation level of the past decade… should double in size every 5 years."
The only hard number in the teaser: Visa's expected return in the model, 15.9% a year.

Constellation: the multiple, then the drawdown

"In 2024, investors were willing to pay 35 (!) times the cash flow for Constellation Software. And today? Just 16.2x." — a valuation halving with no earnings failure attached to it.
"Constellation Software is currently facing its largest drawdown ever" — offered as the reason to buy, not the reason to wait.

The AI-disruption rebuttal is outsourced

Slegers states his position in one line ("I don't believe this") and then hands the argument to three named third parties — community member Kosta Ristovski, Arne Ulland on X, and Michael Gielkens of Tresor Capital.
Ristovski's version is the technical one: "AI solutions are probabilistic, not deterministic—they make inevitable mistakes that require human oversight for business-critical code," and "AI needs consistent data to function, but companies use varied formats that resist generalized automation."
Gielkens' version is the economic one, and the sharpest: "It is not the development costs, but mission-critical data, complex regulations, deep integration into work processes and high switching costs that form the moat… AI therefore does not pose an existential threat, but rather a productivity lever that can increase margins and, through lower market valuations, even create new acquisition opportunities." (He names Chapters Group alongside Constellation and Topicus.)

Visa: a policy headline treated as a temporary discount

The fall is attributed to a specific, dateable event — Trump's proposed 10% cap on credit-card interest rates — and dismissed on a legal rather than an economic judgement: "I think Trump will never be able to push this through in court."
The return is assembled from published components instead of a target multiple: 0.8% dividend + 2.3% buyback = 3.1% shareholder yield, plus ~12% earnings growth.
The co-ownership list is offered as social proof: Chris Hohn, Chuck Akre, Terry Smith, François Rochon, Tom Gayner, Thomas Russo and Warren Buffett.

Topicus: the house analogy

Price flat since 2021 while free cash flow doubled means the multiple halved — stated without a DCF: "It's like buying the same house that cost $200,000 five years ago for $100,000 today."
Topicus' own AI framing is quoted rather than assessed: software moving from "systems of record" to "systems of action" across education, healthcare, finance and the social domain.

Position sizing, disclosed

$50,000 total across three existing holdings — $15,000 / $20,000 / $15,000 — with quantity and limit price published for each (CAD 2,600 · $325 · CAD 105), so the reader can replicate or check the fill.
The closing bullet list reverses the Visa and Topicus amounts. A transcription slip in the summary, not a second decision.

3. In plain English

A jargon-free summary of the thesis behind each argued name. (Renders on each name's consolidated page.)

CSU.TO — Constellation Software Positive

Constellation buys small software companies that sell to one specific industry — the software a bus depot uses to plan routes, or a fire department uses to log calls. These businesses are unglamorous and tiny, but their customers can almost never leave: the software is wired into how the organisation actually works. Constellation buys hundreds of them, keeps them running, and reinvests the cash into buying more.

The stock has halved in valuation terms — from 35 times cash flow in 2024 to 16.2 times now — because investors fear AI will make writing software so cheap that anyone can replace these products. Slegers thinks that misreads what customers are paying for. As one commentator he quotes puts it, the moat is not the cost of writing the code; it is the mission-critical data, the regulations the software encodes, and the pain of migrating away from it. If that is right, AI is a tool that makes Constellation's own developers faster and makes acquisitions cheaper. He put $15,000 in at a limit of CAD 2,600.

V — Visa Inc. Positive

Visa runs the wires that carry card payments between your bank and the shop's bank, and takes a sliver of every transaction. It lends nobody money and carries no credit risk — it is a toll on activity that happens anyway. More than half of every dollar of revenue converts to cash.

The shares fell because President Trump floated capping credit-card interest rates at 10%. That would hurt the banks that issue the cards, not Visa, and Slegers expects it to die in court anyway. The attraction is that the return does not require the market to re-rate the stock: the dividend (0.8%) plus the shares Visa retires each year (2.3%) already hands you 3.1%, and earnings are expected to grow around 12% a year on top — enough to double your money in five years. His model puts the expected return at 15.9% a year. He added $20,000 with a limit of $325.

TOI.V — Topicus.com Positive

Topicus does in Europe what its parent Constellation does globally: buy up small software companies serving specific industries — schools, hospitals, local government, financial firms — and hold them forever. It was spun out of Constellation and run on the same playbook.

The valuation argument is the simplest in this issue and needs no model. The share price today is where it was in 2021. In those five years the cash the business throws off has doubled. So you are paying half as much per dollar of cash as you were — "like buying the same house that cost $200,000 five years ago for $100,000 today." The AI worry that caused the derating is the same one applied to Constellation, and Topicus' own answer is quoted approvingly: it is using AI to make its software do work rather than merely record it. He added $15,000 with a limit of CAD 105.

Summary derived from the archived Compounding Quality post (text in transcript.txt) for personal study. Not investment advice. © Compounding Quality / Pieter Slegers for source material.