Scott R. Grossman
Founder of Vindico Capital, Consumer-Sector Investor
CoStar is too cheap at under 13x while investing for growth, and the selloff after its print looks overdone. The numbers are no longer getting worse, its residential business has flipped positive, a lagging part of the business is becoming less of a drag, and management is on the clock. @InvestsCletus counters that the print looked meh: full-year guidance was kept but the Q3 guide came in below, making it a show-me story. x.com x.com x.comÂ
CoStar Group looks too cheap for its growth, expanding margins and network-effect assets. Its unique data network and marketplaces have durable network effects, and it could lead in agentic real-estate tech, with Homes AI an early look. If earnings compound over 20% organically for three years, below consensus, a high-teens to 20x 2027 P/E is probably too cheap. Q1 EBITDA more than doubled on lower personnel costs and AI efficiencies, and residential should turn profitable in Q2. x.com x.com … Show more
CoStar Group is a favored name because of its massive hold on commercial real estate. x.comÂ
CoStar is still too expensive because its valuation needs a bigger discount for the AI threat. Its data remains ingrained in brokers' workflows and CEO Andy Florance is still well regarded, but the moat has shrunk. Below $30 there might be a way to structure an opportunity. x.comÂ
CoStar sits at the low of its December 2018 crash, having erased 7.5 years of price gains in nine months, which leaves years of revenue growth effectively free. The wounds are largely self-inflicted, while the business is simple enough for a fool to run. x.com x.comÂ
Constellation Software has no way to benefit from AI and little organic growth, so 21x GAAP EBIT looks fair, with perhaps a downside skew if churn rises across its portfolio in the next five years. The market's negative reaction is rational. Its small vertical software businesses were run financially rather than for product, many still on-prem, with no central AI strategy as software gets cheaper to build. Organic growth was 2% in constant currency; inorganic growth is fundamentally different. … Show more
Constellation Software is finally at a fair valuation, making it a good time to accumulate. It has three big opportunities: new types of investments such as small stakes in public companies, adding AI to its thousands of software products at little extra cost, and buying small software companies in Asia and other less competitive regions. x.comÂ
Software stocks such as Adobe sold off on a threat that was never real: the AI labs' internal plans to compete with them were delusional and never a real possibility. x.comÂ
Constellation Software and Topicus are being wrongly lumped in with AI software fears, setting them up to rerate back toward a 3% free cash flow yield once things clear. They adapt, execute and take advantage of deals, with record capital deployments, and moats in vertical market software are shifting rather than disappearing; much of software can adapt with the right culture. A post the author replies to counters that new competitors have beaten Harris and Tyler in govtech. x.com x.com x.comÂ
SaaS will have its time in the sun again, and now, while it is still hated, is the time to pick favorites and build positions. Bearish sector narratives don't last forever, and the view that all SaaS is being disrupted should ease somewhat this summer, though multiples may not return to prior levels. Some SaaS names have little moat against Anthropic and peers, but many, especially cybersecurity and Palantir, are strengthened by the agentic push. x.com x.com x.comÂ
ServiceNow should revalue from a silly low price because it is a blue-chip software company with a sticky customer base and big insider buying. Fears that frontier AI models will replace it are completely overblown. x.com x.comÂ