Are Software Stocks Broken? Plus 3 Stocks on Our Radar
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What is the main topic discussed in this episode?
Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business.
Just my reminder to people who own cyclicals, don't be surprised when there's a cycle.
If there's uncertainty in the markets, there's going to be some great opportunities for investors.
This has to be one of the biggest quarters I've seen from this company in quite some time.
Welcome back to the Canadian Investor Podcast. We have a fun episode coming up today. So we'll start off with software companies and what they're doing and what they could still do to improve their returns performance and why it's still not working and the market is not rewarding them right now. Then we'll look at Bitcoin and why it's still significantly down from its roughly $125,000 a dollar peak in US dollars. And then we'll finish off if we have time, but we should be good with stocks on our radar presented by EQ Bank. So some pretty well-known companies, but companies that have been put a little bit on the back burner with the market, really focusing on AI-related company, specifically the semiconductor right now.
So a fun episode to come up. Hopefully you'll enjoy it. Some fun topics.
Yeah, I mean, I guess do we want to just get right into it on the software side? Yeah, let's do it. So yeah, I made this segment originally... I kind of mentioned, like I wanted to do a segment on what exactly software companies need to do to turn things around in terms of sentiment or, you know, even obviously positive price action. That's why we're buying these companies. And I actually found this like one of the more difficult segments to write because every single thing that I kind of looked at, they were already doing. So this is one of the wildest trades, I guess you could call it, in the market right now i mean it's just it's such a unique situation all these companies are just getting beat up pricing wise but i thought it would be a pretty good segment to go over because i would imagine the majority of listeners have taken some sort of flyer on a on a beat up software company i mean i know you did on constellation when they first had that dip
And then you ended up moving on. But I mean, probably a ton of listeners have at some point over the last year or so bought one of these software companies and they just keep going down. So if we go back a year or so when I mean, maybe even 12, 18 months, the idea was that these companies. need to prove that ai level disruption would not occur at their business if they did this for a period of time the market would eventually react positively so we're now you know four five six quarters later with a lot of these big players Pretty much seeing zero levels of disruption. In some cases, they've actually increased growth, but valuations keep sliding, multiples cut in half. And that would be a best case scenario in some situations.
I know companies like Adobe are down, I think it's like 65% or something like that from, let's say, 2024 highs. Companies that used to trade at anywhere from a 70% to 100% premium to the S&P 500 are actually now reverted to trading at discounted valuations relative to the S&P 500. And because most of these companies... have not seen an impact to operations. It's just a constant re-rating of valuation multiples to the downside pretty much seemingly every week.
Why are software stocks struggling despite solid earnings?
We've kind of moved on. We've kind of moved beyond the software companies needing to actually post results from AI. They're now doing that. Not all of them, but some of them are doing that. So we waited for no disruption. We kind of got that and prices still declined. Then we needed strong AI related growth from some of these software companies. We got that at least in a few places. Salesforce, I know, I believe it's Salesforce is working on like 800 million plus in annual recurring revenue. And then prices just keep declining. And then we kind of had the bear case, the other wait and see of net revenue retention. So most of these software companies, how are they able to keep clients?
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:01–3:46
2
Why are software stocks struggling despite solid earnings?
3:46–4:35
3
What factors are contributing to the decline in Bitcoin's price?
4:35–12:41
4
How do ETF outflows affect Bitcoin's market performance?
12:41–16:45
5
What are the potential risks of quantum computing for Bitcoin?
16:45–48:08
Speakers
3 identifiedMore from The Canadian Investor
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