Building Wealth Doc's note: It's one of the hottest sectors in the market. And in today's issue, Bryan Beach details why it's so important to buy the right stocks now in this groundbreaking field...
Guidewire Software (GWRE) is the one that got away.
The market loves this software giant. While growth has slowed slightly in the last couple of years, Guidewire's revenues steadily compounded at a rate of 20% per year for more than five years.
It's no wonder the stock is up nearly 750% since it first went public... a return that trounces the overall market (up "only" 205%, including dividends).
Back then, I wrote for our company's large-cap service. I didn't have an outlet for high-growth, tiny companies. So I wish this was still a small company just starting out today. Now the big gains are over, and the stock is fairly expensive.
Finding stocks like Guidewire – before they skyrocket – has become an obsession for me. Fortunately, we have other opportunities. You just have to know where to look...
You see, Guidewire is a special kind of software company. The market loves this sector right now, and it has bid up prices accordingly. Investors can still make life-changing gains in stocks like these... but you have to find the "hidden" names – the ones the market hasn't caught on to yet.
Today, I'll show you why this is one of the market's hottest sectors... and why it's so important to buy the right stocks in this groundbreaking field.
Guidewire's co-founder Marcus Ryu once called his business "one of the largest vertical Software as a Service ("SaaS") companies in the history of software."
That's probably an overstatement. But any kind of SaaS business is enough to make the market fall in love...
Ten years ago, most software companies sold "perpetual licenses." This means customers had to buy both the software and the hardware on which to run it. Customers also paid a service fee to have the software installed... then paid a support fee every year to have access to a customer help desk and to receive the latest bug fixes and software upgrades.
Wall Street used to love the perpetual license model because companies would earn a large chunk of revenue when they sell the initial license. The downside was that the sales could be lumpy. (Guidewire, when it first went public, sold "perpetual" licenses.)
But times have changed...
Wall Street loves something else now – the SaaS model. Instead of buying a license for the software, SaaS customers essentially rent the software. A company loads its software product on servers that it maintains, and the customer uses the software via the Internet.
Customers like this arrangement because they don't need to buy or service their own hardware. Software companies like it because SaaS revenue is less lumpy and more predictable...
And the stock market loves it because the SaaS model is incredibly "sticky," meaning customers tend to renew year after year. So as long as the company is relatively successful at booking new customers, revenues naturally pile up over years and decades.
Now, the SaaS model is exploding. Worldwide revenues are projected to reach $205 billion in 2020 and $346 billion by 2027.
But with less than 150 "true" SaaS stocks, you haven't missed this trend at all.
The COVID-19 pandemic took an already unstoppable technology trend that was creating millionaires and accelerated it... That's because this technology has become essential to our economy and even national security, almost overnight. And it's what has allowed all of us at Stansberry Research to keep sending you our investment research even as our employees continue to work from home.
Looking forward, there's no question this group will continue to offer some of the best investment opportunities in the world.
That's because companies that execute this model well are virtually guaranteed decades of consistent revenue with minimal operating costs. They're reliable, cash-producing businesses that also happen to occupy a skyrocketing corner of the technology industry.
Better yet, most of these companies are still young. The best ones could still grow 10-fold or more from here. And every year, there are more and more popping up, relatively unnoticed by the general public.
In a just-released special report, I've identified three tiny, essentially "hidden" opportunities in this powerful sector which are just beginning this kind of growth. They've all got multi-bagger potential. And one of them could earn up to 3,000% in the years to come...
Good investing,
Bryan Beach