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Salesforce.com stock has defensive characteristics, this portfolio manager says

Marc BenioffSalesforce.com (NYSE:CRM) may be too rich for some investors but as the indisputable market leader in CRM software and services, the company is deserving of its high valuation, says Cameron Hurst, chief investment officer at Equium Capital Management, who argues that in these late stages of a lengthy bull run, SaaS companies are where it’s at in the tech sector.

Names like Amazon and Facebook may be the first that come to mind when talking about huge gains in tech stocks in recent years, but with an incredible 250 per cent growth over the past half-decade, Salesforce is definitely part of the conversation.

This week, CRM is hitting record highs, pushing as high as $148 in trading on Thursday. (All figures in US dollars.)

Hurst says that with more and more companies turning to customer relationship management software to crunch their data, Salesforce has emerged as the go-to choice.

“Having that connectivity, that awareness of a client base, the functionality that a CRM system provides you is critical these days because you really need to know your audience, to address it in the right way, you need to come at it from a few different ways,” Hurst told BNN Bloomberg Wednesday. “You just can’t do it manually anymore. So, having that tool is truly enabling in that way.”

“[Salesforce] are not the only CRM system out there but they are identified as the best, and so, they have a premium market valuation for good reasons,” he says. “They’re putting up the right growth, they’re investing and constantly making their systems better, more accessible, more integrated. They’re doing everything right.”

At the end of May, Salesforce announced its first quarter financials, which featured revenue of $3.01 billion, beating the consensus $2.95 billion, along with earnings of $0.74 per share. At the time, management raised its full-year guidance for revenue in fiscal 2019 by $47.5 million to between $13.08 billion and $13.13 billion.

Hurst says Salesforce’s software and services business is the wise tech investment during these last innings of the current bull run.

“Right now, we see a lot of indicators pointing to [a market downturn],” he says. “There’s a lineup of indicators that are telling you now, the party’s been great but it’s getting a little long in the tooth.”

“We really like the fact that [Salesforce] has got the recurring revenue aspect to it. The software and services component within tech is the one that we would favour now,” says Hurst. “Hardware, software and services and semis, right now, semis are rolling, we think. They haven’t fallen out of bed yet but if you look at it from a number of technical views, they’re right on the verge. Software and services is the more conservative end [of the tech sector]. So if you’re going to be in tech, we like that.”

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About The Author /

Jayson MacLean
Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.

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