Now is the time to buy SAAS stocks

I almost never post here, but I just went to morningstar, and the SAAS stocks are rated, 4 and 5 stars. 5 being the most undervalued.

If you believe in buy low, and sell high, this seems like the time to be getting in to SAAS stocks.

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Yes, most of the SaaS stocks that I hold and/or follow have been rated undervalued by Morningstar, even after their Q1 earnings reports.

Here are some examples of companies that recently published their Q1 numbers…

**Stock CurrPrice MstarFMV**
CFLT  $21        $48
DDOG  $98       $192
MNDY  $115      $214
NET   $58        $82
SNOW  $129      $295
UPST  $50        $75

While this looks pretty good, I am not yet convinced that these valuations are dependable.

We are through most of Q1 earnings season and overall tone of the forward guidance has been cautious. The economy is showing multiple signs of a slowdown, consumer sentiment is in the tank and inflation is still high. Most companies signaled that the rest of 2022 will be challenging for them, yet they do not have clarity about how bad or not as bad it could get.

We will know a lot more during the Q2 earnings season which starts in mid-July…we will get more dependable revenue forecasts then.

So over the next 6-7 weeks, we have ample time to over-analyze every single piece of economic data, CEO tweet, press release, industry conference presentation and of course our favorite uncles and aunts at the FOMC. Cue the predictions, forecasts, bullish and bearish calls and stock recommendations. There will be no dearth of opinions, including from me :slight_smile:

And don’t forget about the two 0.5% interest rate cuts (June and July) and QT (June 1st)….fun, fun, fun.

My plan is to raise cash as the market gives me opportunities to do so. Currently at 20%ish and will likely bring it up to 30% or so leading into the Q2 earnings season.

Q2 reports will provide better guages of how the rest of 2022 and most of 2023 will shape up for the economy and our favorite stocks.

Patience is the key to success in this market environment.

Beachman (@Iwannabeontheb2)

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<And don’t forget about the two 0.5% interest rate cuts (June and July) and QT (June 1st)….fun, fun, fun.>

The Federal Reserve plans to RAISE the fed funds rate in June and July.

Wendy

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Morningstar has good data in normal times. Their model seems to break down in unusual environments. They completely missed the 2008-9 financial crisis. There is a bubble popping now. It’s not surprising that M* is behind the curve.

https://www.multpl.com/shiller-pe

Be patient. History says that this bear market will have legs. Don’t try to catch a falling knife. There will be a time but not yet.

Wendy

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Nothing is guaranteed. The psychology of fear and uncertainty is pervasive and may cause the Fed to pause in their aggressiveness to hike rates.

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Shiller is pretty meaningless because of changes in GAAP between then and now … not to mention the many businesses now that don’t fit into a model from back then.

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Uncertainty and confusion provides opportunity and increases the profit potential (because of mindless selling and reduced valuation).

By the time all things a clear and “certain”, stock prices are up again (30, 40 or 100%)

Valuations are down to a level last seen 2016/2017. So what to wait for?

The time to raise cash was Nov-Dec 2021.

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@WendyBG

Yes, two interest rate hikes coming up in June and July…thanks for finding the typo :slight_smile:

I was either checking if anyone actually reads my posts or I was channeling my inner Fed-will-cave optimism.

Cheers!
Beachman

This entire thread is off-topic. Probably good to stop adding to it

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I agree. ENOUGH ON THIS OT THREAD. Let’s get back to discussing companies.

Further posts on the thread will probably be deleted.

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