Values
We look for software companies with strong fundamentals, such as a solid business model, a strong competitive position, a robust software product, and a capable management team. It's also important to consider the quality of the company's customer base and its customer relationships.
Intrinsic Value
Evaluate a software company based on its fundamentals rather than its market price. Look at its revenue growth, profit margins, customer retention rates, and other financial indicators. Also, consider the quality of its software products, its intellectual property, and its market position.
Margin of Safety
Consider investing in software companies when their stock prices are significantly below your estimation of their intrinsic value. This can happen when a company has a temporary setback or when the entire market is down.
Long-term Focus
Software development and adoption can take time, and the market may not immediately recognize a company's potential. A long-term focus is especially important in the software industry, which is characterized by rapid change and high growth potential.
Contrarian Approach
Sometimes, the market underestimates software companies because they are in an unglamorous sector or because they are overshadowed by larger competitors. A contrarian approach can help you identify these overlooked investment opportunities.