Three software as a service investments to purchase for income and growth give investors a way to profit from technology advances.
The three software as a service (SaaS) investments to purchase feature two funds and a company engaged in advanced security products. The three software as a service investments each have jumped since the start of 2023.
Investors who are wary of purchasing individual software stocks may want to consider a fund, said Bob Carlson, a pension fund chairman who heads the Retirement Watch investment newsletter. One such fund that Carlson said he likes is Invesco Dynamic Software (PSJ), designed to track the Dynamic Software Intellidex Index that consists of approximately 30 companies mainly engaged in businesses related to software applications, systems and information-based services.
PSJ Ranks Among Three Software as a Service Investments to Purchase
The index is updated quarterly to incorporate factors such as price momentum, earnings momentum, quality, management action and value. The fund’s turnover ratio is more than 200%.
About 49% of the fund is in its 10 largest positions. Top holdings recently were Electronic Arts (NASDAQ: EA), Forinet (NASDAQ: FTNT), Activision Blizzard (NASDAQ: AITI), Cadence Design Systems (NASDAQ: CDNS) and The Trade Desk (NASDAQ: TTD).
PSJ lost 27.73% in 2022 but is up 11.09% so far in 2023 and 10.48% over the last 12 months. The fund also offers a modest dividend yield of 2.0%.
Three Software as a Service Investments to Purchase Include TDIV
A broader-based fund with a higher dividend yield is First Trust NASDAQ Technology Dividend Index (TDIV). The ETF tries to track the Nasdaq Technology Dividend Index, which is composed of technology and telecommunications companies.
The fund recently had 94 holdings, and its 10 largest positions accounted for 59% of its assets. The biggest weightings recently were Microsoft (NASDAQ:MSFT), Apple (NASDAQ: AAPL), Intel (NASDAQ: INTC), Broadcom (NASDAQ: AGVO)) and IBM (NYSE: IBM). Roughly 13% of the fund was in communication services and the rest fit into the technology sector.
The fund lost 22.12% in 2022 and is up 13.11% so far in 2023. It has gained 3.09% over the last 12 months. As of May 19, the dividend yield was 2.2%.
Rise of Meta Platforms Shows Potential for Three Software as a Service Investments to Purchase
Meta Platforms Inc. (NASDAQ: META), formerly named Facebook, Inc., is a multinational technology conglomerate based in Menlo Park, California. As the owner of Facebook, Instagram and WhatsApp, Meta is one of the biggest information technology companies in the United States.
Seasoned stock picker Jim Woods, who heads the Bullseye Stock Trader advisory service that recommends stocks and options, chose META for his clients to buy on March 16. He then advised taking profits on April 27. The stock soared 19.77%, while the call options he recommended zoomed 112.42%.
In a volatile market, the profit-taking proved prescient as the stock slid after Woods advised his Bullseye Stock Trader clientele to cash out.
“In the fourth quarter, technology companies made headlines with a large number of layoffs,” Carlson wrote to his Retirement Watch subscribers. “They continued layoffs in the first quarter and were joined by companies in a number of other sectors. In their earnings calls, many firms were careful to reduce expectations for the second quarter and the rest of 2023. They reported sales were slowing and inventories were increasing.”
That backdrop led to share price drops for many technology stocks, but they subsequently have started to rebound.
NAPCO Security Picked as One of the Three Software as a Service Investments to Purchase
Napco Security Technologies (NASDAQ: NSSC) is an Amityville, New York-based manufacturer of security products, featuring advanced technologies for intrusion, fire, video, wireless, access control and door-locking systems. Its products are sold and installed by tens of thousands of security professionals worldwide to serve commercial, industrial, institutional, residential and government applications.
The company has a heritage of developing innovative technology and reliable security solutions for the professional security community, including StarLink Universal Wireless Intrusion & Commercial Fire Communicators and new StarLink Connect Radios with Universal Full Up/Download for major brands. Napco Security also offers Gemini Security & Fire Systems and the NAPCO Commercial Platform of 24V Addressable/Conventional/Wireless Systems and Firewolf Fire Panels & Devices.
“When the Federal Reserve stops ratcheting up interest rates, I would expect strong growth stories to continue to profit,” said Michell Connell, who heads the Dallas-based Portia Capital Management. The company’s five-year revenue growth has been 10.45% per year and its five-year earnings growth rate has averaged 28% or more every year, Connell continued.
“EPS growth rate is expected to increase exponentially more than 100% this year,” Connell commented. “That’s well ahead of the industry average expected growth rate of 22%.”
The company is a “strong cash generator,” Connell concluded.
During the past three to five years, Napco Security’s annualized growth rate has topped 20%. The industry average has only been about 5 to 6%, Connell told me.
The Company initiated a dividend when it reported on May 8. While the dividend yield is less than 1%, it’s a start, Connell counseled.
The company’s outlook appears “strong,” Connell opined. Since the beginning of 2023, earnings expectations for the company have climbed.
“While the stock is up over 20% YTD, it could return another 20-25% over the next 12-18 months, Connell conveyed. “However, given its high-octane performance, it can also provide swift downdrafts. The stock has declined more than 60% at certain points. In addition, there is a high short interest of 14%. It makes me cautious in the near-term.”
To avoid overpaying before a potential short-term dip, consider dollar-cost averaging by purchasing shares amid pullbacks, Connell counseled.
Non-Dividend-paying Clearwater Analytics Does Not Qualify as One of the Three Software as a Service Investments to Purchase
Chicago-based investment firm William Blair resumed coverage of Boise, Idaho-based Clearwater Analytics Holdings, Inc. (NYSE: WAN), with an “Outperform” rating early this month following the SaaS company’s first-quarter results that beat consensus expectations and led its management to raise full-year guidance slightly at the midpoint. The brightening outlook reflects broadened resiliency and the high value nature of supporting enhanced investment compliance and risk management visibility and analysis, William Blair equity research analyst Dylan Becker wrote. Plus, Clearwater Analytics features a balanced mix of growth and profitability, while offering a “durable runway” for continued growth and margin expansion, Becker continued.
Clearwater Analytics’ SaaS platform for automated accounting and investment analytics provides comprehensive compliance, reporting, reconciliation and analytics capabilities across equities, fixed income and other asset classes, according to William Blair. The company currently supports 1,000-plus customers collectively managing more than $6.4 trillion of assets across its platform, providing a unified data set of verified and reconciled reporting data, standardized reporting and analysis framework for asset managers.
In the next several years, demand should grow as asset managers look to modernize their front- and back-end infrastructure and reporting capabilities. Clearwater Analytics also recently transitioned its pricing to a base-plus revenue model. The intent is to mitigate potential assets under management (AUM) volatility across its customer base, Becker noted. It should help provide greater durability and visibility in light of recent market volatility across nearly every asset class, while wielding incremental pricing leverage as AUM’s stabilize and recover over time, he added.
“We believe the company maintains a widening competitive advantage in a large and growing market opportunity that collectively accounts for more than $10 billion, as a leading back-office accounting tool across asset managers, insurance carriers and corporations, while leveraging the company’s historical depth and expertise to deliver incremental platform expansion and product innovation,” Becker wrote. “This is most evident in the company’s recent acquisition of JUMP technologies, a France-based front-to-back investment management offering to highlight the company’s efforts to drive greater penetration across asset management teams, while unlocking greater operational efficiency and revenue-generating capabilities for end-customers.”
Debt Ceiling Problem May Affect Three Software as a Service Investments to Purchase
The United States thus far failing to raise the debt ceiling and risking default on its financial obligations would be the “ultimate gift” for China, affirmed the CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations.
CEO Nigel Green’s comments come as President Joe Biden, House Speaker Kevin McCarthy and other congressional leaders trying to make progress in budget negotiations to avoid what could be an unprecedented default that would rock the global financial system. Biden has been reluctant to give details about terms of the negotiation but said he believed a deal could be reached.
The standoff is down to Democrats demanding a “clean” increase without conditions to pay debts resulting from spending and tax cuts approved by Congress. Meanwhile, Republicans are saying they will not authorize any additional borrowing without an agreement to cut spending.
According to the U.S. Treasury, the United States may default as soon as June 1, causing a global economic crisis, if the limit is not raised by Congress before then.
The deVere Group CEO said, “A default would upend the global financial system and would likely be worse than the 2008 crash. It would cause upheaval on an unprecedented level. However, there would be a major beneficiary of the economic and financial fallout: China.”
He continued, “The U.S. failing to raise the debt ceiling and defaulting on its financial obligations would be the ultimate gift for China as it seeks global economic and financial dominance. A default would lead to a decline in the value of the US dollar and a loss of confidence in the U.S. financial system. As such, investors would seek alternative destinations for their capital. China would move to position itself as a more stable and attractive investment option, attracting more international investment and capital inflows. In turn, this would boost the Chinese economy and financial markets.”
CDC Reports Rising Vaccinations Against New Bivalent Variant of COVID-19
The COVID-19 pandemic’s public health emergency status in the U.S. expired on May 11, 2023, and the World Health Organization earlier this month declared an end to its January 30, 2020, call that COVID-19 was a public health emergency of international concern. But the virus is still killing Americas each week and remains a public health threat. Even though death rates are dropping, Dr. Robert Anderson, the chief of the mortality statistics branch at the National Center for Health Statistics, said that COVID-19 deaths could top 100,000 in 2023.
The U.S. Centers for Disease Control and Prevention (CDC) reported at least one vaccination against COVID-19 and its bivalent variant has been given to 270,227,181 people, or 81.4%, of the U.S. population, as of May 10. Those who have completed the primary COVID-19 doses totaled 230,637,348 of the U.S. population, or 69.5%, according to the agency.
Also as of May 10, the United States had given a bivalent COVID-19 booster to 52,996,306 people who are age 18 and up, equaling 20.5% of America’s population. Medical studies have shown COVID-19 vaccinations help keep people healthy and reduce the morbidity from contracting the virus, potentially lifting confidence of consumers to encourage them to shop at stores, travel and otherwise spend money.
Russia’s War in Ukraine Remains a Fierce Firefight
Still posing a huge threat is Russia’s ongoing war in Ukraine. Russia’s military attacks against Ukraine have shifted in the last month from targeting energy infrastructure with weekly strikes to much more frequent missile firings during the night.
News from the war zone indicates Russian soldiers and its Wagner mercenary group are continuing to battle in and around the Ukrainian city of Bakhmut as part of President Vladimir Putin’s reported plan to gain control and then advance to other cities in Ukraine’s industrial eastern region. However, some Russian soldiers reportedly fled the fighting and gave up ground to Ukrainian forces, said Yevgeny Prigozhin, the private militia’s leader.
Despite Ukrainian President Volodymyr Zelensky talking of delaying Ukraine’s expected spring counteroffensive, Prigozhin said it has begun and is proving to be “partially successful.” Nonetheless, Russia fired cruise missiles at the Ukrainian capital of Kyiv, as some of its troops participated in a parade across Moscow’s Red Square for the country’s annual celebration of victory in World War II.
The three software as a service investments to purchase for income and growth seem poised to climb, despite economic and U.S. debt ceiling uncertainty, along with ongoing political risk due to amid Russia’s continuing invasion in Ukraine.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal omf Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.
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Paul Dykewicz, www.pauldykewicz.com, is a respected, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other investment reports.
Paul earned a master’s degree in business administration with a focus on finance at Baltimore’s Johns Hopkins University, where he was elected to two terms as president of its Finance Club. He earlier received a master’s degree from Michigan State University’s School of Journalism, where he was inducted into the Kappa Tau Alpha honor society. Paul received a bachelor’s degree from the University of Michigan in Ann Arbor, focusing on political science, business and economics.
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