From commerce to culture, software is digitizing every aspect of our lives. This secular theme makes SaaS companies attractive investment candidates but also comes with higher valuations that cause volatility.
Unfortunately, the rich prices have haunted them over the past six months as the industry has shed 2.3%. This performance was discouraging since the S&P 500 returned 5%.
Microsoft Corp (NASDAQ: MSFT) is leasing 4.5 gigawatts of computing power from Oracle Corp (NYSE: ORCL) under its Stargate initiative, with OpenAI as a potential customer.
Growth boosts valuation multiples, but it doesn’t always last forever.
Companies that cannot maintain it are often penalized with large declines in market value, a lesson ingrained in investors who lost money in tech stocks during 2022.
The Oracle of Omaha has jettisoned more than 401 million shares of Bank of America stock since mid-July 2024, and built up a greater than 35% stake in one of America's few publicly traded legal monopolies.
A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south.
While some investors embrace risk, mistakes can be costly for those who aren’t prepared.
