Five Cutting-edge Software Investments to Buy as Technology Rises

Five cutting-edge software investments to buy as technology rises again feature three funds, a cybersecurity company and another primed to grow from artificial intelligence and automation.

The five cutting-edge software investments to buy showcase investments that have been climbing as technology stocks recover from a plunge of more than 30% in 2022. Investors who don’t mind volatility may be able to outperform the market by taking the ups and down of technology stock investing in stride to pursuit potentially strong returns in 2023.

A proponent of rising technology funds and stocks is Mark Skousen, PhD, an economist who serves as a Presidential Fellow at Chapman University and heads the Forecasts & Strategies investment newsletter. He is a seasoned prognosticator who recommended a technology fund, Technology Select Sector SPDR Fund (NYSE: XLK), in his newsletter that has jumped 32.71% so far this year through May 29.

Mark Skousen, head of Forecasts & Strategies, meets with Paul Dykewicz.

MSFT Heads Five Cutting-edge Software Investments to Buy

Skousen, who is a descendant of founding father, diplomat and inventor Benjamin Franklin, pointed out that the fund was heavily weighted in some of the strongest technology stocks. One of those stocks is Microsoft (NASDAQ: MSFT), a software development company in Redmond, Washington, that has jumped nearly 40% so far this year.

Chart courtesy of www.stockcharts.com

The Technology Select Sector SPDR Fund offers a current dividend yield of 0.8%. Skousen shared the secret, saying that the fund’s holdings are heavily weighted toward some of the most successful stories in 2023: Microsoft (NASDAQ: MSFT), up 39.38%… Apple (NASDAQ: AAPL), soaring 35.38%… NVIDIA (NASDAQ: NVDA), rocketing 166.53%… Broadcom (NASDAQ: AVGO), gaining 46.18% and Salesforce (NASDAQ: CRM), climbing 62.49%.

Skousen, who also heads the TNT Trader advisory service that recommends both stocks and options, instructed his followers to take a profit on May 25 of 323.96% by selling call options in Nvidia Corp. that he recommended on May 2. He advised boosting the stop price on the stock he recommended on May 2, to protect most of its paper gain.

Five Cutting-edge Software Investments to Buy Aided by 20%-Plus Sector Surge

Despite headwinds of inflation, tight money, a brewing banking crisis and gridlock in Washington about raising the U.S. government’s debt ceiling, the technology-tilted NASDAQ has soared 24.37% year to date and 13.52% in the past three months.

Investors who are reluctant to purchase individual software stocks may prefer a fund, said Bob Carlson, a pension fund chairman who heads the Retirement Watch investment newsletter. One such fund that Carlson said he likes is Invesco Dynamic Software (PSJ), aimed at tracking the Dynamic Software Intellidex Index that consists of approximately 30 companies engaged in businesses related to software applications, systems and information services.

PSJ Leads Five Cutting-edge Software Investments to Buy

Bob Carlson, head of Retirement Watch, meets with Paul Dykewicz.

The index is updated quarterly to incorporate factors such as price momentum, earnings momentum, quality, management action and value. The fund’s turnover ratio is more than 200%.

About 49% of the fund is in its 10 largest positions. Top holdings recently were Electronic Arts (NASDAQ: EA), Forinet (NASDAQ: FTNT), Activision Blizzard (NASDAQ: AITI), Cadence Design Systems (NASDAQ: CDNS) and The Trade Desk (NASDAQ: TTD).

PSJ lost 27.73% in 2022 but is up 14.11% so far in 2023 and 6.14% during the last 12 months. The fund also offers a modest dividend yield of 2.0%.

Chart courtesy of www.stockcharts.com

Tap TDIV as One of Five Cutting-edge Software Investments to Buy

A broader-based fund with a higher dividend yield is First Trust NASDAQ Technology Dividend Index (TDIV). The ETF tries to track the Nasdaq Technology Dividend Index, which is composed of technology and telecommunications companies.

The fund recently had 94 holdings, and its 10 largest positions accounted for 59% of its assets. The biggest weightings recently were Microsoft (NASDAQ:MSFT), Apple (NASDAQ: AAPL), Intel (NASDAQ: INTC), Broadcom (NASDAQ: AGVO) and IBM (NYSE: IBM). Roughly 13% of the fund was in communication services and the rest fit into the technology sector.

The fund lost 22.12% in 2022 and is up 16.12% so far in 2023, 10.40% during the past three months and 0.78% over the last 12 months. The stock’s dividend yield recently reached 2.2%.

Chart courtesy of www.stockcharts.com

CyberArk Software Is One of the Five Cutting-edge Software Investments to Buy

While other cybersecurity software companies have had weakness in their revenues, CyberArk Software Ltd. (NASDAQ: CYBR) did succumb to that problem when it reported its latest quarterly results in May. The company’s annual recurring revenue rose 42% year over year with subscriptions soaring 84% year over year.

CyberArk boosted its estimates for revenue and earnings per share (EPS) for the rest of the year. BofA Global Securities boosted its stock target on May 25 for CyberArk to $187 from $175, while maintaining its buy rating. The stock further is rated “outperform” by Chicago-based investment firm William Blair & Co.

One area of weakness for CyberArk is its dip in long-term deferred revenue, but it occurred for a “good reason,” said Michell Connell, who heads the Dallas-based Portia Capital Management. The company eliminated multi-year maintenance contracts, she explained.

The company’s contracts are now booked on a yearly basis, Connell counseled. This will allow CYBR to have better control over the pricing for its contracts, she added.

Michelle Connell heads Portia Capital Management.

That change caused CyberApp’s cash balance to be a bit low, but it’s still strong, Connell continued. The cash balance currently stands at $1.2 billion, she added.

The stock is up 17.04% year to date and 3.82% in the past 12 months. However, since the company reported its results earlier in May, six analysts have increased their price targets of it, Connell said.

Connell estimates a potential upside in the next year for CyberApp of 15%. However, the stock can be volatile, Connell counseled.

“At times, it’s down as much as 50%,” Connell continued.

When establishing a position, Connell advised investors to consider dollar-cost averaging to avoid overpaying before a potential short-term dip, Connell counseled.

Chart courtesy of www.stockcharts.com

Five9 Finds Place Among Five Cutting-edge Software Investments to Buy

Five9, Inc. (NASDAQ: FIVN), a San Ramon, California-based provider of enhanced customer experience (CX) solutions for digital advertising, uses practical AI, automation and journey analytics embedded as part of its platform to serve more than 2,500 organizations worldwide. The company started 2023 with strong performance as it beat first-quarter expectations and raised full-year guidance.

First-quarter results were driven by “resilient demand” for the company’s solutions and consistent execution, despite the ongoing impact of macroeconomic uncertainty on the business, according to a recent research note from William Blair & Co.  In particular, Five9 produced “robust results” in its enterprise segment and in international markets, according to William Blair’s equity research analyst Matt Stotler.

The company is also benefiting from increased demand for AI and automation, with these capabilities cited as the primary driver of 42% of the requests for proposal (RFPs) that Five9 participated in during the quarter, Stotler wrote. Management noted that Five9 tends to see higher win rates when AI and automation are the focal point of customers’ buying decisions, and the company is able to monetize those capabilities at a much higher rate than with “live agent seats,” he wrote.

“Overall, we continue to believe that the business is benefiting from strong secular tailwinds that are still in early days,” Stotler stated.

Chart courtesy of www.stockcharts.com

Foreign Affairs Factor into Financial Outlook

U.S. Secretary of State Antony Blinken said on Tuesday, May 30, that the “time is now” for Turkey to stop opposing Sweden joining NATO but added the Biden administration favors providing Turkey with upgraded F-16 fighters “as soon as possible.” Blinken said that the administration had not linked the issues but added that some U.S. lawmakers have done so. Plus, President Joe Biden reportedly linked the two issues in a phone call with Turkish President Recep Tayyip Erdogan on Monday, May 29.

Russia’s missile attacks against Ukraine on May 30 marked the 17^th time this month that the Ukraine’s capital was hit by missiles from its neighboring nation that launched an ongoing invasion on Feb. 24, 2022. Ukraine officials reported strikes on several districts in the Ukraine’s capital city of Kyiv, with one person reported killed and at least seven injured. Russia’s onslaught against Ukraine came from a combination of drones and missiles.

A least a couple of buildings in Moscow were struck by drones on the morning of May 30 to mark the first such incursion on Russia’s capital since President Vladimir Putin ordered troops to invade its much smaller neighbor. Despite Putin calling Russia’s attack against Ukraine a “special military operation,” the United Nations has reported that its investigations of the invasion have found evidence of “war crimes.”

President Joe Biden’s National Security Council spokesperson said the United States does not support attacks inside of Russia as a “general matter.” However, the administration has been providing Ukraine with equipment and training to retake their own sovereign territory.

The cutting-edge software investments to buy as technology stocks recover from a dismal 2022 for the sector offer investors an opportunity to ride a recovery. When technology stocks trend upward, the potential returns can be highly tempting.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal omf Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.