In this article we discuss the 5 Best SaaS stocks to buy and hold for long term profits. If you want to read our detailed analysis of these stocks, go directly to the 10 Best SaaS Stocks to Buy and Hold for Long Term Profits.
Best SaaS Stocks to Buy
5. Zscaler, Inc. (NASDAQ: ZS)
Number of Hedge Fund Holders: 34
Zscaler, Inc. (NASDAQ: ZS) makes it to the list of the best SaaS stocks to buy for long-term profits because the company’s Cloud products offer internet security and authentication solutions that are seeing a huge demand in the world amid increasing cybersecurity threats. Zscaler, Inc. (NASDAQ: ZS) products like ZIA, ZCP, Zero Trust Exchange and SSL security services are also in demand because of remote work trends, as companies are investing to secure their online assets while enabling their employees to work from anywhere.
Wedbush Securities analyst Dan Ives, who recently said in a report that close to 70% of workloads will be in the Cloud by 2025, added Zcaler to his favorite cybersecurity stocks list.
Zscaler, Inc. (NASDAQ: ZS) is also getting the attention of the smart money, as 34 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the first quarter, down from 35 funds a quarter earlier.
Artisan Small Cap Fund, in their Q4 2020 investor letter, mentioned Zscaler, Inc. (NASDAQ: ZS). Here is what the fund said:
“We also exited our investment in Zscaler. Zscaler provides cloudbased Internet security solutions. Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. Furthermore, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a remote workforce make operating IT infrastructures increasingly complex. Zscaler’s scalable, cloud-based security platform is a more secure and efficient way to connect users and applications, which eliminates the need for several layers of security (firewalls, VPNs, etc.) developed and built over the last couple of decades. While the pandemic crisis is likely disrupting some areas of Zscaler’s new sales funnel, the company is particularly well-suited to scale and accelerate our market share-gain thesis. Ninety percent of employees are remotely connecting to the enterprise IT network in today’s inverted world, as opposed to prior solutions which are geared to support 10%-20% of workers connecting remotely with the rest connecting from within the walls of a corporate network. Many employees have used traditional VPN connections to log into their networks remotely, but Zscaler’s platform offers a more secure connection without exposing an entire internal network, is easier to configure and is less costly to operate at scale. While the trend toward connecting remote devices over the Internet backbone remains firmly in motion, the stock appreciated over 300% in 2020, quickly outgrowing our small-cap market cap mandate, and we ended our successful campaign.”
4. BigCommerce Holdings, Inc. (NASDAQ: BIGC)
Number of Hedge Fund Holders: 26
BigCommerce Holdings, Inc. (NASDAQ: BIGC) is operating in the ecommerce industry that is seeing exponential growth as consumers are preferring to buy and sell online over physicals stores. The Texas-based company’s Cloud solutions help customers make online stores and manage their B2B, multi-channel and international ecommerce operations.
BigCommerce Holdings, Inc. (NASDAQ: BIGC) stock has gained 30% in the last 30 days.
Last month, Guggenheim upgraded the stock to Neutral from Sell and said that the company’s valuation has become at par with its peers. This was after BigCommerce Holdings, Inc. (NASDAQ: BIGC) posted upbeat Q1 results. Morgan Stanley also upgraded the stock to Equal Weight from Underweight and kept its price target of $57.
Citi also upgraded the stock to Neutral from Sell but slashed its price target by $10 to $55.
Matrix Capital Management is one of the 26 hedge funds tracked by Insider Monkey having stakes in BIGC at the end of the first quarter. The fund owns over 3.9 million shares of the company.
Alger Small Cap Focus Fund, in their Q1 2021 investor letter, mentioned BigCommerce Holdings, Inc. (NASDAQ: BIGC). Here is what the fund has to say about BigCommerce Holdings, Inc. in its letter:
“BigCommerce Holdings, Inc. was among the top detractors from performance. BigCommerce operates a software-as-a-service platform, providing various services for launching and scaling e-commerce operations, including store design, catalog management, web hosting, checkout, order management and reporting As of December 31, 2020, it served approximately 60,000 online stores across industries in approximately 155 countries. The stock underperformed during the first quarter after the company provided guidance that was below the peer group average for growth for 2021, which indicated possible market share loss. The company monetizes its services with software subscriptions, which represent 67% of its sales, and by processing digital payments as the majority of partner and services revenues, which represents 33% of sales. BigCommerce recognizes its revenues from digital payments on a net basis, which understates the payment revenue contribution and margin compared to its peer group which recognizes revenues on gross basis.
BigCommerce has transformed over the last decade into a flexible digital commerce platform powering the next wave of online shopping for mid-market and enterprise customers. BigCommerce is differentiated among modern cloud platforms because its open SaaS architecture uniquely positions the firm for the more complex needs of mid- market and enterprise merchants. This is a big opportunity. and we believe BigCommerce is well-positioned for continued market share gains.”
3. MongoDB, Inc. (NASDAQ: MDB)
Number of Hedge Fund Holders: 46
MongoDB, Inc. (NASDAQ: MDB) is a NoSQL database service that offers a host of Cloud-based database solutions for fully-managed Cloud database, database search products, database charts services, developer and enterprise services. MongoDB, Inc. (NASDAQ: MDB) has gained a whopping 65% year to date. In the first quarter of 2021, the company’s revenue jumped 39% to $181.6 million. Loss per share in the period came in at $0.15, beating the Street’s forecasts by $0.21.
For the second quarter, MongoDB, Inc. (NASDAQ: MDB)’s revenue forecast came in at $180 million to $183 million, compared to the consensus estimate of $181.01 million.
A total of 46 hedge funds tracked by Insider Monkey were bullish MDB at the end of the first quarter, up from 36 funds a quarter earlier.
2. Palantir Technologies Inc. (NYSE: PLTR)
Number of Hedge Fund Holders: 32
Founded by legendary investor and billionaire Peter Thiel, Palantir Technologies Inc. (NYSE: PLTR) continues to be one of the best SaaS stocks to buy and hold for long-term gains. In addition to its Foundry and Gotham platforms, Palantir is getting famous for its SaaS product called Apollo. The company continues to bag huge contracts from the US government. Earlier in June, the company received a $7.4 million contract renewal with CDC for disease monitoring and outbreak response. Last month, Palantir Technologies Inc. (NYSE: PLTR) jumped after the company signed a $111 million contract with U.S. Special Ops.
Famous investor and billionaire Stanley Druckenmiller bought 6 million shares of the company in the first quarter of 2021, worth $139.4 million.
Cathie Wood’s ARK Investment Management currently holds 18.6 million shares of Palantir that amounts $433.95 million. PLTR occupies 0.86% of ARK’s total portfolio.
Guardian Fund, in their Q4 2020 investor letter, said that they acquired a position in Palantir Technologies Inc. (NYSE: PLTR) because they believe that the company’s revenues will grow faster than its expenses. Here is what Guardian Fund has to say about Palantir Technologies Inc. in its letter:
“In October, we bought a stake in Palantir Technologies Inc. (NYSE: PLTR). Earlier, in June, our concentrated Tech Fund, which has a mandate to also buy shares in the secondary market, bought shares of Palantir from insiders, before the direct listing. At the price we bought, the equity had much more upside than downside. Palantir is operating a software platform that functions as the digital infrastructure for data-driven operations and decision making. The software helps to structure and capture context in data of large corporations. Governments are increasingly realizing that they have to deal with serious data challenges and cyber risk. As most governments cannot attract the most talented software engineers, they need private enterprises such as Palantir to help them build solid infrastructure. Foundry, Palantir’s software for enterprises, is used by companiesto make safer cars and airplanes or to accelerate cancer research. The speed to bring new clients on board is improving and revenues will grow faster than expenses. Palantir has a long runway of growth ahead.”
1. Shopify Inc. (NYSE: SHOP)
Number of Hedge Fund Holders: 91
Any list of top SaaS stocks to buy and hold would be incomplete without Shopify, which continues to be the top choice of millions of people around the world who want to make web stores to sell their products. New stores created on the company’s platform increased by 62% between March 13, 2020 and April 24, 2020 compared to the prior six weeks.
Loop Capital recently upgraded Shopify Inc. (NYSE: SHOP) stock to Buy from Hold. The firm’s analyst Anthony Chukumba said that he expects the company to see growth as it benefits from the continued secular shift to e-commerce. The analyst set a price target of $1,400 for Shopify Inc. (NYSE: SHOP).
With a $1.9 billion stake in Shopify, Stephen Mandel’s Lone Pine Capital owns 1.7 million shares of the company as of the end of the first quarter of 2021. Our database shows that 91 hedge funds held stakes in Shopify as of the end of the first quarter, versus 90 funds in the fourth quarter.
You can also take a peek at 10 Best ADR Stocks to Buy in 2021 and 10 Best Plastics Stocks to Buy Now.
