In this article, we discuss the 5 best software stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out the 12 Best Software Stocks To Buy According To Hedge Funds.
05. Intuit Inc. (NASDAQ:INTU)
Number of Hedge Fund Holders as of Q2, 2022: 75
Intuit Inc. (NASDAQ:INTU) is a leading provider of financial technology services that help individuals and small companies manage their money, attract and keep customers, eliminate debt, and file taxes with ease, among other things. Over 100 million users are served by Intuit Inc. (NASDAQ:INTU) platforms, which include Credit Karma, Mailchimp, QuickBooks, and TurboTax.
On October 3, JPMorgan analyst Mark Murphy downgraded Intuit Inc. (NASDAQ:INTU) shares to ‘Neutral’ from ‘Overweight’ with a $360 price target. The analyst is “quite positive” about the longer-term fundamentals of the company, but he anticipates that earnings growth will be offset by a decline in multiples because he does not believe that 10% to 15% organic growth will continue to carry the mid-20s or higher price-to-earnings multiple in an environment of rising interest rates and a recession.
As of Q2 2022, 75 of the 895 hedge funds tracked by Insider Monkey held Intuit Inc. (NASDAQ:INTU) shares valued at a combined total of $5.4 billion. Terry Smith’s Fundsmith LLP was its largest hedge fund shareholder, with ownership of 2.4 million shares valued at $914 million.
04. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders as of Q2, 2022: 92
Adobe Inc. (NASDAQ:ADBE) is a global software company based in San Jose, California. On October 13, Saket Kalia, an analyst at Barclays, maintained an Equal Weight recommendation on Adobe Inc. (NASDAQ:ADBE) shares while lowering his price target from $340 to $330.
As of Q2 2022, Adobe Inc. (NASDAQ:ADBE) shares were held by 92 out of 895 hedge funds tracked by Insider Monkey with a total value of $7.5 billion. Its largest shareholder was Fisher Asset Management, with ownership of nearly 6.2 million shares valued at $2.3 billion.
Here is what Aristotle Capital specifically said about Adobe Inc. (NASDAQ:ADBE) in its Q2 2022 investor letter:
“We sold our position in Adobe Inc. (NASDAQ:ADBE) to reduce our weighting in the Information Technology sector. We continue to see risk in higher valuation technology names, such as Adobe, due to both slowing business trends and multiple compression. Adobe has exposure to both the SMB market segment as well as e-commerce, both areas which have shown pockets of weakness during the current earnings season.”
03. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders as of Q2, 2022: 99
ServiceNow, Inc. (NYSE:NOW) is a cloud services provider that offers its customers a host of technologies such as artificial intelligence, machine learning, workflow management, and encryption. The firm is based in Santa Clara, California, the United States. On October 13, UBS analyst Karl Keirstead lowered his price target on ServiceNow, Inc. (NYSE:NOW) to $465 from $515 and kept a Buy rating on the shares.
As of Q2 2022, 99 of the 895 hedge funds tracked by Insider Monkey owned shares of ServiceNow, Inc. (NYSE:NOW), valued at $5.2 billion. Its largest shareholder was Ken Fisher’s Fisher Asset Management, with ownership of 1.5 million shares valued at $694 million.
Here is what Aristotle Capital specifically said about ServiceNow, Inc. (NYSE:NOW) in its Q2 2022 investor letter:
“ServiceNow, Inc. (NYSE:NOW) provides digital workflows on a single enterprise cloud platform called the Now Platform. The company offers products on the Now Platform and standard applications specially designed for automating IT, Employee and Customer workflows. ServiceNow delivers software via the Internet through a simple and easy-to-use interface that can deploy the package offerings and allow customers to build their applications. Customers can choose to host software by themselves or through third-party service providers. The company offers professional services, both directly and through partners, to help customers deploy and utilize the products and platform. We consider ServiceNow a leading beneficiary of the digital transformation initiatives taking place in enterprises around the world. We believe it is the best-of-breed technology company with attractive topline growth metrics supported by a growing Total Addressable Market (TAM) along with positive FREE cash flow which is recycled into accelerating growth initiatives both organically and through selective M&A.”
02. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders as of Q2, 2022: 116
San Francisco, California-based Salesforce, Inc. (NYSE:CRM) is the world’s leading customer relationship management platform provider. Its cloud-based platform has applications for sales, service, marketing, and more. More than 150,000 companies use the Salesforce, Inc. (NYSE:CRM) platform.
On September 28, Cleveland Research downgraded Salesforce, Inc. (NYSE:CRM) to Neutral from Buy. On September 29, Caroline Haskins of Business Insider revealed that Salesforce, Inc. (NYSE:CRM) has subtly grown into a sizable government contractor. According to Haskins, public contract data reveals that Salesforce, Inc. (NYSE:CRM) has closed more than 1,400 partnerships with government agencies in the last five years.
According to the Insider Monkey data on 895 leading hedge funds, 116 hedge funds were long Salesforce, Inc. (NYSE:CRM) shares as of Q2 2022, with the total shares held by hedge funds valued at $7.9 billion. Ken Fisher’s Fisher Asset Management was the largest shareholder on record, with ownership of 15.7 million shares valued at $2.6 billion.
Here is what Oakmark Funds specifically said about Salesforce, Inc. (NYSE:CRM) in its Q3 2022 investor letter:
“Salesforce, Inc. (NYSE:CRM) has become a dominant global player in sales, customer service, commerce and marketing software over the past 20 years. The company earns 80% gross margins and grows 20% organically. Plus, virtually all of its revenue is recurring. We see Salesforce as a great business that we’ve admired from afar for a long time. More recently, the organization has made some changes at the top that prompted us to take a closer look at the stock. New CEO Bret Taylor and CFO Amy Weaver are bringing a culture of financial discipline. We believe this renewed focus on profitability and capital return, combined with Salesforce’s strong underlying business characteristics, will yield strong results. The current valuation of 3.9x next year’s revenues represents a significant discount compared to publicly traded peers and recent private market values in the software space that have similar growth profiles. We view this discount as an opportunity to invest in a great business at a good value.”
01. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders as of Q2, 2022: 258
Topping the list is Microsoft Corporation (NASDAQ:MSFT), one of the world’s largest technology companies. On October 14, Morgan Stanley analyst Keith Weiss lowered his price target on Microsoft Corporation (NASDAQ:MSFT) to $325 from $354 and kept an Overweight rating on the shares. Given the weaker PC demand environment and rising foreign exchange headwinds, he has reduced his revenue forecast for fiscal Q1 by 1% and for FY23 by a little over 2% ahead of earnings.
A total of 258 out of the 895 hedge funds tracked by Insider Monkey had bought Microsoft Corporation (NASDAQ:MSFT) shares during Q2, 2022. Out of these, Ken Fisher’s Fisher Asset Management is Microsoft Corporation (NASDAQ:MSFT) largest investor. It owns 28 million shares that are worth $7.3 billion.
Lakehouse Capital mentioned the company in its Q3 2022 investor letter. Here is what the fund said:
“During the month, the Fund initiated a new position in Microsoft Corporation (NASDAQ:MSFT), a name that is no doubt familiar to our investors. The company was founded by Bill Gates and Paul Allen in a friend’s garage in 1975 and began dominating the operating system market with MS-DOS by the mid-1980s. The company has come a long way since then and is now widely considered the most critical and indispensable IT mega-vendor for businesses globally. In addition to its well-known Windows operating systems and Office productivity suite, the company has a broad portfolio of strategic products, including a rapidly growing public cloud business in Azure and a sizeable gaming presence.”
You can also take a peek at the 10 Best Fast Money Stocks To Buy Now and the 10 Most Valuable Internet Companies Today.
