When we asked Mark Lin, a portfolio manager with CIBC Asset Management, to name his favourite stock for the next five years, he chose Fiserv Inc., a U.S. provider of information technology services to the financial industry. He is a big fan of Fiserv, a top holding in his CIBC Global Technology Fund, because of its ability to produce steady growth–a rarity in the topsy-turvy world of tech.
THE STOCK: Fiserv Inc. (FISV-Nasdaq)
Why are you bullish on Fiserv?
It's not sexy, but we don't want companies that exhibit volatile growth patterns. Fiserv is the backbone for many banks and insurers that outsource their technology functions. Its services range from account and cheque processing to electronic bill payments and mobile bank ing services.
What type of growth can it generate?
Excluding acquisitions, we are counting on organic growth of 5 per cent to 6 per cent. We expect earnings per share to rise by 10 per cent annually over the next five years.
What are the risks?
The big one is execution. With long-term contracts, Fiserv must hit performance benchmarks or incur financial penalties. Also, its stock is not cheap and trades at the upper band of its historical valuatio n.
What about rivals?
Costs are high for financial institutions to switch IT providers, so competition is about who can get the customers first.
But with more than 14,500 clients globally, Fiservis the absolute leader.
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