That’s why Hedberg thinks that as nervous investors look for the highest-quality stocks in the months ahead they should turn their attention to the software sector. “While general IT budgets for this year are likely to be stable to up slightly across many industries, budgets for digital and especially security transformation are likely to rise at a faster rate and be dedicated to projects that drive growth or efficiency.” “As every experience becomes digitally connected, enterprise software vendors are the digital transformation arms dealers,” he said. Trends like cloud computing, hybrid work, automation, AI, and the need for greater cybersecurity will continue to ramp up in the years ahead. “Fears of the Omicron COVID variant, slowing COVID/WFH tailwinds, interest rate fears, difficult comps, sector rotations, FX headwinds, margin pressure (from labor shortages and some COVID-related cost savings fading), and overall valuation fears hit software stocks” at the end of last year, he wrote in a recent research note.īut for all of that, he says, the sector has a lot going for it. Matthew Hedberg, RBC’s managing director of software research, can rattle off a pretty long list of reasons investors might be nervous about the software sector right now. Hedberg also named a series of disappointing newly-public stocks he thinks will rally this year.His predictions this year include Dropbox and Splunk becoming acquisition targets.Matthew Hedberg of RBC named his eight top picks in the software industry in 2022.The Nasdaq is one example of a secondary market for US stocks.
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