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**Constellation Software $CSU is down 55% in one year, but FCF per share is up 26%. Let’s look at what top funds are saying about this massive disconnect in their latest quarterly reports.**
**Akre Capital Management - Q1’26**: Views the recent 45% share price decline as a disconnect from reality rather than a fundamental flaw. While the stock plummeted, the business grew free cash flow per share by over 26% in 2025. Akre remains bullish on the AI front, arguing that Constellation's portfolio consists of "advantaged incumbents" who will treat AI as a commoditized tool for efficiency rather than a disruptive threat. They maintain that the current valuation represents a significant bargain, as the firm’s "customer intimacy" and high switching costs remain intact despite the leadership transition.
**Donville Kent - Q1’26**: Exited its position in 2025 at prices between $3,250 and $3,760, citing a breakdown in the core investment thesis. This was driven by three factors: the complete departure of Mark Leonard from both the CEO role and the board, the increasing difficulty in modeling the business as it shifts toward minority investments (which lack the high-multiplier "cash flow engine" of full acquisitions), and the "black box" nature of AI risk. With over 1,500 subsidiaries, the firm argued it is now impossible to accurately assess which niche businesses might be disrupted by AI, making a reliable valuation unattainable.
**Giverny Capital - Q4’25**: Constellation Software has faced significant headwinds, with a notable decline despite projected earnings growth of nearly 20%. This is attributed to its diversified portfolio of bespoke software solutions that cater to a wide range of niche markets, creating a strong customer dependency on its products. The abrupt retirement of founder-CEO Mark Leonard has also spooked investors, yet the company remains undervalued with a price-to-earnings ratio at an all-time low. If earnings continue to grow at 15% to 20%, the stock price will eventually reflect this growth.
**Sequoia Fund - Q4’25**: The disciplined acquisition strategy of Constellation in niche software markets has historically driven strong returns. Despite a challenging year, the company’s revenue and earnings growth remains solid, though slightly below historical norms. The resignation of founder Mark Leonard raised concerns, but there is confidence in new CEO Mark Miller’s capabilities. The portfolio is expected to sustain its value, especially with the potential for AI to enhance operations rather than disrupt them. The current valuation, trading at a high-teens multiple, presents a compelling investment opportunity.
**Emerald Focused Equity Strategy - Q4’25**: The recent decline in Constellation Software's stock has prompted an opportunity to invest in a company with a unique business model focused on vertical market software. The firm’s decentralized structure and strong capital allocation discipline have historically yielded high returns on acquisitions. With a free cash flow margin of 21% and an attractive valuation close to an all-time low, the potential for compounding value through acquisitions remains strong, supported by high switching costs and minimal competition in niche markets.
**REQ - Q4’25**: The leadership change at Constellation Software following Mark Leonard's resignation has created short-term uncertainty, yet the strength of its decentralized structure mitigates key-man risk. With new CEO Mark Miller at the helm, the company is expected to continue its successful operational model. The firm’s ability to acquire businesses in a challenging environment may lead to lower prices, making this an opportune time for investment. The cultural foundations laid by Leonard will persist, allowing the company to thrive despite market concerns.
**Akre Capital - Q3’25**: Constellation Software’s impressive customer intimacy and decentralized structure position the company well for future growth, even with the departure of Mark Leonard. The firm has a long history of understanding its clients' software needs, which remains crucial in a post-AI landscape. The new leadership under Mark Miller is expected to uphold Leonard's legacy, ensuring continuity in operations and capital allocation. Recent stock purchases by executives signal confidence in the company’s future, making it a compelling investment despite current market conditions.
Source :
Akre Capital Management - Q1’26 letter : [https://www.hfbestideas.com/letters?open=oqxOy8vNXzMv](https://www.hfbestideas.com/letters?open=oqxOy8vNXzMv)
Donville Kent - Q1’26 letter : [https://www.hfbestideas.com/letters?open=u22Pvj4D3YMF](https://www.hfbestideas.com/letters?open=u22Pvj4D3YMF)
Giverny Capital - Q4’25 letter : [https://www.hfbestideas.com/letters?open=m7FYaybs63U4](https://www.hfbestideas.com/letters?open=m7FYaybs63U4)