You may not enjoy sass from your spouse, but you’ll enjoy some SAAS (Software as a Service) in your portfolio.
In the 70s and 80s, business application software became a real business and anything that won the market in that timeframe, dominated the business market for the next 30-40 years. We’re talking about Microsoft, Intuit, Oracle, Sage and many others. However, these companies and the systems they created (or acquired) were developed before the internet.
Once the foundation of the internet was put in place, and broadband became the standard, the cloud was possible. However, software created before the internet can’t exactly be transferred to the cloud very well. You really have to start from scratch and use entirely new development tools to create a modern application made for the internet (Facebook, Twitter, SalesForce, Zoom, etc).
SalesForce and NetSuite were one of the first, during the late 90s and early 2000s. Others began to follow but it takes a long time to develop enough features to compete head to head with a product that has had 30 years of development. Even though the old product uses outdated technology, that does not mean it’s not advanced. So you see a delay of a decade or two before the pure cloud systems begin to take away customers from the ‘old’ world.
The 2010s are where businesses woke up and took notice of these built for the internet, 100% cloud native applications. They had enough features, and the technology was night and day better than what they had been using for decades. Any new business starting out was going straight to the cloud, and old companies were starting to make the switch. We are right in the middle of a once in a generation investing opportunity.
Most of these cloud apps have only just IPO’d in the past 5 years. Most of them in the past 1-2 years. They are taking off in price just as they are taking over the world. Whoever controls the market over the next 5 years, will control the market over the next 20. We will not see suitable replacements until new development technology comes around, with enough features to make people switch again. So we have some time before the apps of today become obsolete. Until that time, they will have pricing power once their market share is the majority, and for now they are enjoying 30-100% sales growth every year. They are growing like bonkers as many other sectors of the economy struggle.
How well are these stocks doing you ask? I made a portfolio for my family of the leaders in each niche and over the past 5 years the average annual return is 60%. I am a slow learner and so it took me a bit before I had the confidence to put all my money where my mouth is, but I can tell you over the past few years I have sold all my index funds and 100% of my money is in software stocks. This Covid crash affected most of my software stocks for a month, but by late April most had regained their highs and my favorites are up over 140% for the year. It’s truly remarkable.
I sold software for 14 years and work in finance at an IT company currently. I have been on both sides of the software transaction and have developed an industry insiders knowledge of who the winners are and who are the wannabes. Of course, the winners are the ones to invest in. I have also been actively investing and trading for 15 years, with mixed results until I decided to focus on the industry I know best. Right now, it doesn’t matter very much how expensive these stocks are, it matters more how fast they are growing. Of course, this will end badly one day, but I expect we are 5-10 years away from that.
I have started a blog and a portfolio of my favorites to help educate others on what’s happening in the industry and how we can take advantage of it. This is a heretics thread, I’m obviously trailing off the beaten path of this board here. But some will be interested.
MOD EDIT: Spam links removed. PM the OP if you want a link to their blog.