FUD day?

Most of our SaaS stocks are selling off steepily today, after a solid several weeks.  There are no fundamental news to the entire sector that I can find.  A weekend Barron's article warned "Sky-High Software Stocks Are Beginning to Look Like They’re Forming a Bubble": [https://www.barrons.com/articles/soaring-software-stocks-sho...](https://www.barrons.com/articles/soaring-software-stocks-show-signs-of-a-bubble-51564188580?mod=hp_DAY_10). 

The arguments are mostly the same as all the previous articles of this kind: 

(1) many software companies are now valued at more than 20 times projected 2019 sales without any earnings.  No major industry has a higher valuation.  Many appear to be priced for perfection, which makes them vulnerable to small disappointments.

(2) sentiment shifts.  Growth stocks have been in vogue for a decade now.  If investors ever shift back to value, software sector could reset to a lower valuation.

(3) Accounting.  Software is one of the few remaining industries in which investors do not focus on GAAP earnings, in particular stock compensations.

(4) Acquisition no longer applies.  The rally in software stocks has left many software issues trading above takeout multiples such as SAP and CRM's recent acquisitions.

Other than the Barron's article, another thing I noticed is that there might be a pattern of profit taking around end of month for our stocks.  Does anyone else see this?

Personally, I am taking the selloff as an opportunity to add to a few of my SaaS positions today.
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(Re-post – seems to get the formatting messed up)

Most of our SaaS stocks are selling off steepily today, after a solid several weeks. There are no fundamental news to the entire sector that I can find. A weekend Barron’s article warned “Sky-High Software Stocks Are Beginning to Look Like They’re Forming a Bubble”: https://www.barrons.com/articles/soaring-software-stocks-sho…

The arguments are mostly the same as all the previous articles of this kind:

(1) many software companies are now valued at more than 20 times projected 2019 sales without any earnings. No major industry has a higher valuation. Many appear to be priced for perfection, which makes them vulnerable to small disappointments.

(2) sentiment shifts. Growth stocks have been in vogue for a decade now. If investors ever shift back to value, software sector could reset to a lower valuation.

(3) Accounting. Software is one of the few remaining industries in which investors do not focus on GAAP earnings, in particular stock compensations.

(4) Acquisition no longer applies. The rally in software stocks has left many software issues trading above takeout multiples such as SAP and CRM’s recent acquisitions.

Other than the Barron’s article, another thing I noticed is that there might be a pattern of profit taking around end of month for our stocks. Does anyone else see this?

Personally, I am taking the selloff as an opportunity to add to a few of my SaaS positions today.

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The Barron’s article (Lofty Software Stocks are looking Bubbly) covered a lot of ground discussed on this Board. (to the point you made above).

Additionally, it had a quote from Fred Hickey, author of “The High-Tech Strategist”. The quote referred to the current state of software as being like 2000. (it really makes the reader sit up and take notice)

A quick Google search for Mr Hickey reveals a couple of articles:

Feb 18, 2019 - Seeking Alpha - “Why a lifelong technology expert favors owning Gold”

Oct 8, 2018 - Zero Hedge - “The Crash is Coming”

FUD indeed…

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It also would not be the first time that funds and other investment houses have sold great performers in order to make their quarterly numbers look good. Given the timing on these broad and deep drops, I am suspicious. Also, lots of talk in the financial news about the pending recession, which may or may not be around the corner and may or may not be as bad as 2008. NEW York Times devoted a lot of space, above the fold, to factors that will signal the next decline.

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It’s end-of-month for Hedge Funds locking in gains combined with that Barron’s article, and a sprinkling of some names like NOW not reporting as great as their usual. T+2 means any sales gotta get done today for July results to be locked in on those names.

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