Stance reflects how each is framed in this post — all five Best Buys are Positive. ServiceNow, Salesforce and Intuit appear once each inside the AI argument (as derated peers or as proprietary-data examples) and are left to the talking points. Research legend: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis. Foreign listings use their Yahoo symbol as the row id — Constellation CSU.TO, Topicus TOI.V (as the post writes it) — with research pointing at the US OTC lines (CNSWF, TOITF). Written post with no timestamps — the At link opens the article.
| Ticker | Name | Research | View | What he said | At |
|---|---|---|---|---|---|
| CSU.TO | Constellation Software | QT · SA · STK · FA | Positive | Best Buy #1. "The best serial acquirer in the world" — 1,000+ VMS companies across 100+ niche markets: "If it's critical and boring, Constellation wants to own it." Up more than 20,000% since IPO and, until now, never down more than 25% — "the current drawdown equals over 50%. This could provide massive opportunities for long-term investors like ourselves." Mark Leonard has retired to the board; successor Mark Miller (Trapeze 1995, scaled Volaris to 200+ deals, chaired the Lumine spinoff) owns ~$700m of stock and "recently bought even more shares on the open market." "An amazing company that I think the market is way too negative on." | read ↗ |
| TOI.V | Topicus.com | QT · SA · STK | Positive | Best Buy #2. The Constellation spin-off buying European vertical market software; an owner-operator whose stock has also fallen on AI concerns. 70% of revenue is maintenance and other recurring revenue — "VMS systems are very sticky," with low churn, high pricing power and deep customer relationships. CEO Robin van Poelje and his wife's family own 30.9%: "We don't think in terms of five years, we think in terms of generations… we have plenty of time." "Software companies are currently priced low, and Topicus has a long-term strategy. That's a good recipe for attractive returns." | read ↗ |
| ADP | Automatic Data Processing | QT · SA · STK · FA | Positive | Best Buy #3. Cloud payroll, HR and tax compliance for 1.1m clients — "pays 1 in 6 workers in the U.S.," average client tenure 13 years, retention 92.1%. Three engines: HCM technology and employer services (63.7%), PEO services (30.7%) and interest on ~$3.3trn of client funds held in transit (5.6%). Four reasons AI won't disrupt it: the world's most accurate real-time wage/tax dataset; no room for error (a miscalculated paycheck is a lawsuit or federal penalty); high switching costs; and internal efficiency via ADP Assist under CEO Maria Black (with ADP since 1996). | read ↗ |
| FTNT | Fortinet | QT · SA · STK · FA | Positive | Best Buy #4 (a repeat from January). Another significant drawdown, now driven by two things: "Fears of AI disruption in security software" and reports that China has banned foreign security software in certain sectors. "But Fortinet is still an amazing company" — founder-run by the Xie brothers (15% ownership), with cybersecurity essential to every business, so revenue and earnings keep growing. "With the continued decline in its share price, Fortinet is trading at attractive valuation levels." | read ↗ |
| ADBE | Adobe | QT · SA · STK · FA | Positive | Best Buy #5. "Two things keep declining with Adobe. The first thing? The share price (a bad thing). Second? The number of shares outstanding (a good thing)" — buying back almost 9% of shares a year while revenue and earnings still rise. "It's a very interesting Cannibal Stock." Three reasons the AI-replacement thesis is wrong: professionals are trained on Adobe in school (retraining teams and rebuilding workflows is the switching cost); Adobe created the PDF and the creative industry's standard file formats; and Firefly AI is embedded in the existing tools — with AI credit usage up 3x quarter-on-quarter in December. "The market thinks AI will disrupt Adobe's business, but right now it looks like AI could be helping it." | read ↗ |
Stance = how each name is framed in this post, not a price rating. As always the five are candidates from outside the Compounding Quality portfolio. The AI-panic screen is on the actionable insights page.
A jargon-free summary of the thesis behind each pick. (Renders on each name's consolidated page.)
Constellation owns more than a thousand small software companies, each one selling a program that a single narrow industry depends on — scheduling for London buses, management software for Florida golf courses, library systems in Canada. None of them is exciting; all of them are hard to replace. It buys these businesses cheaply, leaves them running, and uses the cash they throw off to buy more. Since listing it has returned over 20,000%.
What makes this month different is the drawdown. In its entire history the stock had never fallen more than 25% from a high; it is now down more than 50%, because investors fear AI will make niche business software worth nothing, and because the founder, Mark Leonard, has retired. Slegers thinks both fears are overdone: the software is embedded in operations rather than sold on features, and the successor, Mark Miller, has been inside the company since its first acquisition in 1995, owns roughly $700m of stock, and has been buying more in the open market — which is what people do when they think the price is wrong. The row uses the Toronto ticker (CSU.TO); the US over-the-counter line is CNSWF.
Topicus does in Europe what Constellation does globally, and it was spun out of Constellation to do it: buy small companies that make software for one specific industry, then hold them. That kind of software — "vertical market software" — is different from the broad tools everyone uses like Excel or Slack. Because it is custom-fitted to one trade, customers almost never leave, it can raise prices without losing anyone (the cost is small relative to how essential it is), and 70% of Topicus's revenue arrives as recurring maintenance fees.
Its share price has fallen with the rest of the software sector on AI fears. The reason Slegers is comfortable is the owner: CEO Robin van Poelje and his wife's family hold nearly 31% of the company and describe their horizon in generations rather than years — "Building such a compounder is difficult, it is time consuming. But we have plenty of time." Cheap price plus a genuinely long-term controlling owner is the setup he wants. The row uses the ticker the post itself writes (TOI.V, Toronto Venture); the US over-the-counter line is TOITF.
ADP runs payroll. It pays one in six American workers, serves 1.1 million businesses, keeps clients for 13 years on average and loses under 8% of them a year. It also earns interest on the roughly $3.3 trillion of client money that passes through its hands each year in the days between collecting payroll and paying it out — a quiet third revenue stream.
The AI-replacement argument runs aground on two hard facts here. First, ADP owns something a language model cannot conjure: decades of real, private wage and tax data covering a sixth of the American workforce. Second, payroll has no tolerance for a plausible-sounding mistake — get a tax rule wrong and the result is a lawsuit or a federal penalty, so no finance chief swaps a proven system for an unproven one to save a little money. Meanwhile ADP is using AI itself, under the "ADP Assist" banner, to automate its own compliance work — which widens margins and makes the product stickier at the same time.
Fortinet returns from the January list, cheaper. It sells the firewalls and network security that keep attackers out of company systems, and the revenue is high-margin and recurring because nobody cancels their security.
Two new worries have pushed the stock down further: a general fear that AI will disrupt security software, and reports that China has barred foreign security products from certain sectors. Slegers treats the second as a real but bounded geopolitical issue and the first as noise — cybersecurity is a defensive necessity for every business, which is why revenue and earnings keep rising while the price falls. The founders, brothers Ken and Michael Xie, still run the company and own 15% of it.
Adobe sells creative and document software by subscription — Photoshop, Acrobat, the tools every designer and marketing department uses. Slegers sets up the case as a pair of declines: the share price is falling (bad) and so is the number of shares outstanding (good). Adobe is buying back close to 9% of itself every year, so each remaining share owns a bigger slice of a business whose revenue and earnings are still growing. That is what he calls a "cannibal stock."
The market's fear is that AI makes creative software unnecessary. His three counters are practical rather than theoretical: professionals learn Adobe in school and companies have built their workflows around it, so switching means retraining whole teams; Adobe invented the PDF and the standard file formats the industry exchanges work in, so collaborating with anyone else means using its products; and its own Firefly AI is built directly into the existing tools, with AI credit usage tripling in a single quarter. On the evidence so far, AI is adding to Adobe's usage, not subtracting from it.
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.