Question:
It seems like more and more software companies are offering their software via the cloud—Adobe announced its creative suite will be subscription based vs. a perpetual license. Likewise I think that what is happening with Microsoft’s Office suite. For an investor, this looks like a steady revenue stream for the company. But from a user, I don’t own anything anymore, and that makes me mad. How do you think this will affect software companies?
Answer:
With cloud-based software, the services is the same. As a user, you are still getting what you are paying for. We believe both Microsoft Corp. (NASDAQ: MSFT) and Adobe Inc. (NASDAQ: ADBE) have the license mobility to benefit from the cloud. We think software companies will benefit, and see their margins grow higher.
Overall, cloud computing excites us. First it was mainframes, then servers, file storage and now software. It provides employees the flexibility to work from anywhere, while it allows companies to view information technology as a utility. It also allows companies to have the redundancy backup that they otherwise might not be able to afford.
There was a concern that the virtual workspace would hurt commercial real estate. In reality, not everyone will be working remotely. Moreover, there are a growing number of facilities that house the Internet servers, as well as power plants that provide those facilities with electricity to run.
Question:
What’s the difference between growth investing and value investing?
Answer:
When you invest for growth, you, typically, are seeking capital appreciation over the long term. You will likely choose investments that you believe will exhibit a faster-than-average increase in share price over the coming years. Growth stocks have the potential to outperform slower-growing investments, such as income stocks, because gains are generally reinvested in the company to achieve further growth rather than distributed to shareholders as a dividend. Growth stocks can be volatile. One way to minimize the impact of that volatility on your portfolio is to purchase shares of a growth mutual fund. You should enjoy instant diversification (though diversification alone cannot guarantee a profit or ensure against a loss). And an actively-managed mutual fund also offers professional management expertise.
A value investor seeks bargains, and chooses investments that have low prices in relation to such factors as earnings, sales, net current assets, and the book value of the issuing companies. A value investor might reject a popular blue chip stock, because the price per share is too high relative to earnings, even though the issuing company is stable and has a record of steady growth. Instead, the value investor seeks to buy stock of a solid company that has temporarily dropped from favor or bargain priced for some other reason. In doing so, the value investor predicts that the share price will eventually return to a higher level when the stock returns to favor, and the market drives the stock price back up. A mutual fund manager may specialize in growth investing, value investing, or some combination.
At Henssler Financial we believe you should Live Ready, which includes understanding the different styles of investing. If you have questions regarding your investment strategy, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.