Good morning all, and welcome to an unusual color on your brokerage screens. See if you can remember what it used to be called and what it used to mean.
Now, whilst you dig out the Crayolas and check the color chart, we want to raise a serious point with you. We published an important note yesterday in our Tech Select letter, and if you are remotely interested in growth stocks - and by the way, you should be, since we believe they will lead the way back up as they led it down - you should take a look.
Shifts in the vendor landscape in enterprise software tend to be catalyzed by a financial crisis of some kind, because it leads to a reduction in customer budgets and that means companies want more for less. Since software is a deflationary industry with each new name vendor competing to offer X times more functionality for Y times less money, the industry is only too happy to provide solutions. Around the time of the 2008-9 Great Financial Crisis, cloud became mainstream, meaning, it started being bought by the C-suite with large enterprise deals, not just the sales or support desk with departmental budgets.
Right now we think the squeeze on spending is going to drive adoption of the New Cloud Generation of products, and that we believe will benefit these companies’ stocks.
We think we’re at the start of a real run in market share gains for low-cost, new-to-market names like DataDog ($DDOG), Cloudflare ($NET), ZScaler ($ZS) and so on. These stocks ran up post Covid with youthful enthusiasm and have been taught a lesson in H1 2022. They’ve been moving back up quietly when nobody was looking. And we think this can be a long-run trend. In 2009 everyone would have laughed at you had you banged the drum for Salesforce or Microsoft or Adobe or Amazon. A few short years later it was obvious, duh, that you should have bot them, and the kid at the bus stop still reminds you of this every time you see him to get his read on the macro impact on stocks right now.
Not YOLOing them.
Not buying calls on margin.
Like Big Money. Not like Chad.
Read all about it, at the link below.
It’s a good note. You’ll like it (unless you are  the kid at the bus stop, who is too busy shorting this bear to worry about what might be going up, or,  Marc Benioff).
Cestrian Capital Research, Inc - 20 July 2022
DISCLOSURE: Cestrian Capital Research, Inc staff personal accounts hold long positions in, inter alia, MSFT, AMZN, DDOG, NET, ZS.