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4 Software Stocks for Growth Investors to Snap Up in 2019

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Software industry is benefiting from a strong digital transformation environment. Major breakthroughs in cloud computing, predictive analysis, artificial intelligence (AI), digital personal assistants and Internet-of-Things (IoT), have set the stage for solid growth in the software industry.

In fact, software industry continues to shine, almost unaffected by the rigors of volatility plaguing the technology sector. Notably, concerns regarding data privacy, GDPR implementation and Brexit in Europe, NAND price crash, and tariffs on semiconductors as a result of the US-China trade war, has kept investors on tenterhooks for quite some time now.

The industry’s uptrend is evident from strong performance of Invesco Dynamic Software ETF (PSJ), which has surged 32.6% in the past year. Moreover, iShares North American Tech-Software ETF (IGV) and SPDR S&P Software & Services ETF (XSW) have returned 24.6% and 24.4%, respectively.



Notably, in comparison Technology Select Sector SPDR ETF (XLK) has returned 15.4% over the same time.

What’s Favoring Software Players?

Software players are leaving no stone unturned to enhance their applications portfolio. The initiatives include extending capabilities of smart assistants by leveraging natural language processing (NLP) technology that is helping to expand market reach.

Moreover, software companies are providing customized solutions to maximize engagement with clientele. Notably, an increasing focus on providing a better customer experience is bolstering growth of customer relationship management (CRM) software. Further, the growing need to secure cloud platforms amid rampant incidents of cyber-attacks and hacking is driving demand for cyber security software.

Additionally, increasing enterprise investment in Big Data and analytics, and ongoing adoption of Software-as-a-Service (SaaS) favor the growth prospects of the software industry.

Notably, Gartner estimates global IT expenditure to grow 3.2% in 2019 to $3.8 trillion, on account of enterprise software, cloud and digital transformation efforts. Enterprise software spending, which is likely to record highest growth of 8.3% in 2019, is being driven by SaaS, adds Gartner.

Furthermore, enterprises are aiming at rapid migration to cloud and DevOps technologies for achieving scalability and agility in favor of software development and IT operations, which in turn will help in delivering a flawless digital experience to clients.Cloud software is likely to witness growth of more than 22% this year compared with rise of 6% for all other Software forms, adds Gartner.

Making the Right Choice

The immense prospects of the software industry make it difficult to pick the right stock. It is here that the Growth Style Score comes in handy. Our Growth Style Score condenses all the essential metrics from the company’s financial statements to achieve a true sense of quality and sustainability of its growth.

Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) when combined with Growth Score of A or B offer the best investment opportunities in the growth investing space. You can see the complete list of today’s Zacks #1 Rank stocks here.

We have zeroed in on four software stocks with the favorable combination. Moreover, each of the stocks has outperformed the S&P 500 in the past year.

One Year Price Performance



4 Top Picks

CommVault Systems, Inc. (CVLT - Free Report) sports a Zacks Rank #1 and Growth Style Score of A.

The company offers Unified Data Management solutions for high-performance data protection, universal availability and simplified management of data on complex storage networks. The company is expected to benefit from robust demand of its management software service.

Notably, the company has delivered average positive earnings surprise of 15.3% in the trailing four quarters. Over the past 30 days, the Zacks Consensus Estimate for current fiscal year has moved upward by 1.7% to $1.84.  

Apart from this, CommVault’s long-term earnings growth rate is pegged at 15.8%.

SS&C Technologies Holdings, Inc. (SSNC - Free Report) provides software products and software-enabled back-office administration services to the asset managers. Synergies from buyouts of Eze Software, DST Systems, and Intralinks are expected to boost profitability and expand global market reach

SS&C Technologies has a Growth Style Score of A and a Zacks Rank #1. Notably, over the past 60 days, the Zacks Consensus Estimate for current fiscal year has moved upward by 7.3% to $3.81.

The company has delivered average positive earnings surprise of approximately 6% in the trailing four quarters.

Long-term earnings growth rate for SS&C Technologies stands at 12%.

Cadence Design Systems, Inc. (CDNS - Free Report) is experiencing strong demand for its software – particularly verification and digital design products – from customers providing datacenter servers and networking products.

With a Growth Style Score of B and a Zacks Rank of 1, Cadence has delivered positive earnings surprises in the trailing four quarters, with an average beat of 11.4%. Long-term earnings growth rate for Cadence is pegged at 12%.

Notably, over the past 30 days, the Zacks Consensus Estimate for current fiscal year has moved upward by 4.1% to $2.04.

Intuit Inc. (INTU - Free Report) provides financial, accounting and tax preparation software and related services to small businesses, consumers, and accounting professionals. The stock is riding on impressive growth across its Small Business and Self-Employed, and Consumer Tax segments. It has a Growth Style Score of A and a Zacks Rank #2.

Intuit has delivered average positive earnings surprise of 55.6% in the trailing four quarters.  Notably, over the past 30 days, the Zacks Consensus Estimate for current fiscal year has moved upward by 3 cents to $6.54.

Long-term earnings growth rate for Intuit stands at 16.2%.

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