The Software Stocks That Worked (And Didn't) In 2015

In a new report, MKM Partners analyst Kevin Buttigieg took a look back at the enterprise software industry and discussed investing themes that have worked and those that haven’t over the past two years.

Typically, many of the worst performers in a given industry will outperform in the following year (and vice versa), but that trend did not occur in enterprise software in 2015.

Some Things Never Change

Of the 21 stocks that MKM covers in the field, 14 of the stocks either outperformed or underperformed in both 2014 and 2015 compared to the NASDAQ. Against the S&P 500, this number jumps to 17 out of 21 stocks. On an absolute basis, 16 of the 21 stocks had the same (positive or negative) returns in 2014 and 2015.

Related Link: 5 'Bold' Predictions For 2016

Themes That Worked

Many investment groups, such as SaaS, big data and cybersecurity, had both winners and losers in 2015, but MKM noted that several themes mostly worked universally this year. “Themes that worked across all segments in our coverage universe were cloud positioning (which helped names like MSFT and RHT and hurt names like ORCL) and margin expansion (which helped CRM, ULTI and CTXS and hurt names like ORCL and N),” Buttigieg explained.

Best And Worst Performers

MKM named Buy-rated salesforce.com, inc. (NYSE: CRM), The Ultimate Software Group, Inc. (NASDAQ: ULTI) and ServiceNow Inc (NYSE: NOW) as top 2015 performers MKM still likes headed into 2016.

MKM also still likes two of the worst performing stocks in the space in 2015: Buy-rated VMware, Inc. (NYSE: VMW) and NetSuite Inc (NYSE: N).

Disclosure: The author holds no position in the stocks mentioned.

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