On-Demand Software Index: A selective bounce

The On-Demand Software Index continues to outperform the major stock indexes on a relative basis but remains behind the S&P Software Index (IGV). Yesterday the on-demand software index beat the high flying NASDAQ. It is interesting to examine the YTD…

The On-Demand Software Index continues to outperform the major stock indexes on a relative basis but remains behind the S&P Software Index (IGV). Yesterday the on-demand software index beat the high flying NASDAQ.

It is interesting to examine the YTD performance of the individual company stocks comprising the index (below.) Overall the index is down -10.28% YTD, however, half the stocks are break-even or positive. This split in performance is most likely related to the usual factors impacting growth stocks: industry, competition and growth projects.

With our current economic conditions a company’s financial picture in the regards to cash flow/debt, profitability and capital requirements will be used to ascertain a company’s survivability.  In addition, it is critical to determine if a company’s products/services are likely to be maintained or even expanded by its customers and prospects. For example, more scrutiny will be placed on prospects’ finances than usual.

For these reasons, we have discussed earlier that companies such as Blackboard (BBBB) and Constant Contact (CTCT) are servicing markets that should continue to generate growth even through a recession.

Link to original post