12 Best German Stocks to Buy According to Hedge Funds

3. SAP SE (NYSE:SAP)

Number of Hedge Fund Holders: 27

SAP SE (NYSE:SAP) delivers enterprise software solutions that empower businesses to optimize operations and drive digital transformation through its integrated ERP, HR, supply chain, and technology platform offerings. Its solutions are designed to enhance efficiency, facilitate data-driven decisions, and foster sustainable business practices across diverse industries.

The company’s Cloud Revenue segment expanded by 27% year-over-year in Q4 and drove double-digit total revenue growth for the third consecutive quarter. For the full year, cloud revenue grew by 26% in 2024, which was fueled by the strong performance of the Cloud ERP suite. This suite saw a 34% increase and represented 84% of total cloud revenue. Major companies like BP, Total Energies, and BASF use SAP SE’s (NYSE:SAP) cloud offerings for their digital transformations.

The company’s total cloud backlog reached a record high of €63 billion in 2024, which was up 40% year-over-year. SAP SE (NYSE:SAP) is further enhancing its cloud offerings by integrating AI capabilities and simplifying customer adoption through flexible licensing options and strategic migration incentives. The company is also using its position in business data and process knowledge to develop innovative AI-driven solutions that enhance the value proposition of its cloud offerings and position the company for accelerated double-digit total revenue growth through 2027.

Polen Global Growth Strategy is highly positive about the company’s performance and long-term potential. It stated the following regarding SAP SE (NYSE:SAP) in its Q3 2024 investor letter:

“In the third quarter, the top relative and absolute contributors to the Portfolio’s performance were MSCI, SAP SE (NYSE:SAP), and AON. SAP reported a good quarter, reflecting solid cloud adoption and disciplined execution around their transformation program, which will help the company focus resources on their most strategic growth opportunities. We view SAP as one of the more resilient software business models as it is an essential part of their customers’ day-to-day operations and cannot easily be turned off or scaled back. Given its attractive market position, vast partner ecosystem, balanced growth across new and existing customers, high recurring revenues, and improving margin profile, we think SAP is well-positioned to continue delivering at least mid-teens earnings growth for many years.

We modestly trimmed our position in SAP, though it remains among our largest holdings. When we reduced the position, shares had appreciated nearly 40% YTD due to strong business performance accompanied by multiple expansions. While our conviction in the business remains high, we felt it was appropriate to taper back what had become a very large position, especially with the valuation at the upper end of its range.”