пятница, 29 ноября 2019 г.
Why Canada Tech Stock Open Text (TSX:OTEX) Is the Perfect TFSA Buy!
Acquisitions can be a stock price booster or a drag on shareholder value. The final outcome purchases have depends upon the financing method and the negotiated price.
When shareholders suspect that an acquisition is too costly or requires high leverage, the market value of the stock may decrease. Likewise, if investors believe that the company paid a fair price and can afford to pay the purchase price without taking on too much debt, the cost of shares may increase.
Financing method and price matters because the higher principal and interest payments will dig into shareholder returns. Investors will either project lower or higher ROI (return on investment) going to shareholders depending on these two crucial variables affecting the distribution of company returns between debtholders and shareholders.
Open Text is a solid example of a successful acquisition
In November, a fantastic Canadian technology firm, Open Text (TSX:OTEX)(NASDAQ:OTEX), announced the purchase of Carbonite, a U.S. cybersecurity firm based in Boston, Massachusetts. Open Text will need to temporarily increase its debt to finance the negotiated price of US$1.42 billion.
Shareholders don’t seem too concerned about the temporary increase in debt; in the two weeks since first reporting the acquisition plans, Open Text’s stock price has appreciated by about 4%.
Carbonite is profitable and in a high-margin industry. It sells cloud and endpoint security software, bringing in US$405 million in annual revenue per year, or about 30% of Open Text’s purchase price. In effect, Open Text will pay about 3.5 years of Carbonite’s yearly income in the transaction.
It isn’t uncommon for companies to report the sales price as a multiple of the current annual revenue. Ideally, the premium attached to the deal should represent the net present value of the transaction plus the cost savings and revenue benefits arising from improved economies of scale and scope from the merger.
What’s great about the Carbonite deal
Individual professionals and small- to medium-sized businesses comprise the majority of Carbonite’s current sales pipeline. A multitude of smaller contracts carries the same benefits as diversification. A loss in revenue from many smaller business relationships impacts businesses less than would a single larger deal.
Open Text takes a different approach by focusing on building its enterprise pipeline. Larger contracts are no doubt worth more, which is why Open Text boasts a $58.49 stock price. The addition of Carbonite will expand upon Open Text’s consumer base to key strategic markets.
The strategic market expansion should add to shareholder value. What’s better is Carbonite’s technology complements Open Text’s current artificial intelligence services and products, contributing to more significant economies of scope. The overlap in required skills to create and maintain the products should enhance efficiency.
Past Open Text acquisitions mostly successful
Mergers and acquisitions pose many challenges for corporations. It is not a small task to integrate two companies into one unit. The process of realigning goals between new management and transitioning employees is even more difficult since people tend to resist change.
Luckily, Carbonite is not Open Text’s first acquisition. The experience of Open Text’s leadership team to effectively leverage the organizational knowledge, skills, and technology of purchased businesses will be crucial to ensure the purchase adds optimal shareholder value.
Amazon CEO Shocks Bay Street Investors By Predicting Company “Will Go Bankrupt”
Amazon CEO Jeff Bezos recently warned investors that “Amazon will be disrupted one day” and eventually “will go bankrupt.”
What might be even more alarming is that Bezos has been dumping roughly $1 billion worth of Amazon stock every year…
But Bezos isn’t just cashing out, he’s reinvesting his money into a company utilizing a fast-emerging technology that he believes will “improve every business.”
In fact, this tech opportunity could be bigger than bigger than Amazon, Tesla, and Berkshire Hathaway combined.
Get the full scoop on this opportunity that has billionaire investors like Bezos convinced – before it’s too late…
Fool contributor Debra Ray has no position in any of the stocks mentioned. The Motley Fool recommends Open Text and OPEN TEXT CORP.
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3 Dynamite Stocks That Could Double in Value by 2021
There are several ways of building up your investment portfolio. If you are seeking fast culmination of wealth, even if it comes with considerable risk, your portfolio might be full of growth stocks.
If you prefer to play it safe and depend on time and compounding to build your wealth, you might have a safe portfolio, filled with blue chip dividend stocks.
But most investors seek a combination of both types and they prefer to choose stocks various sectors to minimize the risk of overexposure.
This seems a safer way to venture out of your circle of competence. Boyd Group stock (TSX:BYD.UN), IGM Financial (TSX:IGM), and Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) are three stocks you might consider for a combination of growth and dividends.
Collision repair centres king
Boyd Group is one of the largest operators of collision repair shops in the country. The company is also a glass retail operator, working in 34 states in the U.S.
The Boyd Group Income Fund is an open-ended mutual fund, with the majority of its share in the Boyd Group and its subsidiaries.
This company has had a terrific growth spurt. The market value of the company has grown by about 320% in the past five years. This year has been especially rewarding to its investors, with a growth of almost 84%.
Currently, the company is trading at almost $198 per share at writing. If it continues with its five-year growth pace and expands by 64% a year, Boyd Group can double your investment in less than two years.
An asset management company
IGM Financial is one of the leading asset management companies in the country. The company oversees assets worth approximately $163 billion. The company is efficient in its business, with a return-on-equity of 16.4% and a profit margin of almost 22%.
But a better number than these is IGM’s dividend yield: a juicy 5.8%. The company hasn’t cut dividends in the past five years and it’s unlikely to slash dividends in the future given the company’s stability and continual growth.
The market value of the company is $38.74 per share at the time of writing — a 16% increase from the same time last year.
Renewable asset managers
Brookfield Renewable Partners is another asset manager in renewable properties. The company owns 2,000 assets in 30 countries worldwide. These renewable energy assets have excellent growth potential in the future of sustainability. The company provides a good mixture of growth and dividends.
The company has grown its market value by almost 67% in the past five years. This year has been especially fantastic for the company’s growth, as it increased its market value by 62%.
Right now, the company is trading at around $60 per share at writing. The dividend yield is also a decent 4.5%. This investment will give you a chance to grow your wealth on two fronts: via dividends as well as capital gains.
Foolish takeaway
A well-balanced portfolio will grow your wealth at a decent pace without suffering too much from the economic downturns. It’s a subtle ratio to maintain between volatility and growth.
If it’s done right, however, your investment portfolio can create a dependable passive income, as well as a strong safety net for you to fall on in case your primary income gets cut off for any reason.
5 TSX Stocks for Building Wealth After 50
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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Renewable Partners. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada.
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China: Crypto Exchange IDAX Locks up Cold Wallet as CEO ‘Goes Missing’
Chinese cryptocurrency exchange IDAX has suspended deposits and withdrawals after its CEO allegedly disappeared.
In a blog post on Nov. 29, IDAX, which earlier this week warned it was seeing a run on withdrawals, said the whereabouts of Lei Guorong were currently unknown.
IDAX: cold wallet access “restricted”
“Since we have announced the announcement on November 24, IDAX Global CEO have gone missing with unknown cause and IDAX Global staffs were out of touch with IDAX Global CEO,” it reads.
The blog post continues that as a precaution, the company’s cold wallet was on lockdown to protect user funds:
“For this reason, access to Cold wallet which is stored almost all cryptocurrency balances on IDAX has been restricted so in effect, deposit/withdrawal service cannot be provided.”
IDAX did not directly link Lei with cold wallet access, nor did it suggest that users’ money was specifically at risk.
Exchanges feel renewed pressure
The debacle follows a contentious period for cryptocurrency in China after authorities doubled down on the country’s 2017 trading ban last week. As Cointelegraph reported, a sweep saw the central bank vowing to “dispose of” any exchanges it found flouting the ban.
IDAX stopped serving Chinese users at the start of the week. Its predicament nonetheless provides yet another example of the pitfalls involved when trusting a third party to store cryptocurrency.
Earlier this week, South Korean exchange Upbit likewise halted users’ access to funds after a suspicious transaction saw more than $50 million leave its books at once.
While investors appear to be waking up to the risks, recent data shows that even institutional traders still overwhelmingly prefer trusting others with their funds.
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