No. of Recommendations: 79
A little excerpt from Beth Kindig's blog/newsletter (I'm a free subscriber, but you do need to sign up). This is cut from a much longer article and is just a piece of the conclusion:

https://beth.technology/how-to-pick-long-term-stock-winners-....

"How to evaluate cloud software
The evidence doesn’t point to a rational reason for the sell-offs. Some stocks are priced high, but knowing which ones deserve to be, is going to be more important than ever.

• The larger the market, the safer the investment... Does the product solve a pain and reduce overhead for businesses? These will outlast the more niche markets and products that are considered a convenience. To illustrate, if you are providing software for office communications that replaces office telecom equipment, not only is your product a necessity but it will be the solution to high telecom bills during a time when costs are being cut. There are numerous (such) examples.

Ignore earnings estimates....

• We hear a lot about competitive moats, yet high switching costs is a protective buffer that serves two purposes: It locks in subscription revenue and staves off competitors... Look for companies that have high switching costs.

My prediction is this may be one of the last cycles when tech is considered less safe than value stocks. As the market will find out (the hard way), cloud software is actually very safe. It is insulated from trade wars and overseas manufacturing issues. It reduces costs for enterprises, which is ideal for a recession.

Lastly, cloud software is at the beginning of a rapid growth cycle compared to its counterparts in tech — such as mobile, e-commerce and advertising — which are reaching saturation, are finding themselves in the cross hairs of anti-trust, and are susceptible to consumer spending changes.

The best companies in the category of “cloud software” will continue to post rapid growth regardless of economic conditions, and the investors who run from this sector will suffer bigger losses from missed opportunities than investors who know their winners."

Sensible woman,

Saul
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