2. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC)
Short % of Shares Outstanding: 0.70%
Number of Hedge Fund Holders: 41
Forward Price to Earnings Ratio as of August 28: 14.39
SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is a global provider of software and related services for the finance and healthcare sector. Their software helps businesses manage operations effectively with a special focus on data handling and other complex processes.
They operate through Financial Services, Healthcare Solutions, Software-Enabled Solutions, and other Professional services. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) has a track record of successful strategic acquisitions to grow its business and has integrated more than 50 companies since 1995. These expansions have given the company a strategic edge firstly through the market reach it has gained through expansion and secondly by its growing software services portfolio.
The fiscal Q2 2024, was a testimony that these acquisitions have turned out to be profitable for the company. Its second-quarter growth was led by Intralinks, a key subsidiary of SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) incorporated in 2018. The subsidiary, now one of the business segments for the company grew 16.1% during the quarter to deliver 6.5% adjusted revenue growth for the company.
SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) has been facing debt issues recently, however, management has been quick to address the issue and paid down $25.2 million in debt during the quarter. Moreover, it expects full-year revenue to grow to $5.79 billion with earnings margins at 38.7%, both indicating substantial improvement year-over-year.
SSNC is one of the most undervalued tech stocks to buy now. It is trading at 14 times its forward earnings, a 27% discount to its sector. Analysts expect its earnings to rise by 11.90% during the year to reach $5.16.
SSNC was held by 41 hedge funds in Q2 2024, with total stakes worth $2.53 billion. Pzena Investment Management is the top share holder of the company with a position worth $890.4 million.
Giverny Capital Asset Management stated the following regarding SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) in its fourth quarter 2023 investor letter:
“It’s a bit like two neighbors, both young and with excellent incomes. If one diligently saves a good portion of their income, dollar cost averages regularly into the stock market, pays a little extra on the mortgage every month and avoids credit card debt, while the other dabbles in exotic investments, is on a first-name basis with a local bookie and maxes out credit cards at the holidays, we have a pretty good idea which household will be richer at age 65, no matter who earns more money over their careers.
It’s the same for companies. Earnings power matters, but not more than capital allocation. I thought about this for a while and sold SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) in the third quarter. This is a fine business with a history of making smart acquisitions. But recently the decision to use floating rate debt to finance acquisitions when interest rates were at historical lows has been a costly mistake. SS&C is growing modestly, but its earnings are stagnant because incremental cash flow must be dedicated to higher interest charges.
Selling SS&C and Markel, which were each about 4% of the portfolio, was not easy for me. Both businesses trade for reasonable prices and have good competitive positions. They have strong CEOs who have been in the job for many years. CEO Bill Stone founded SS&C and is a billionaire thanks to his own decisions. Tom Gayner at Markel is a well-regarded stock market investor and a much-admired leader.”
