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Feb 25, 2009 - 6:33 AM EST
Software companies, as represented by the iShares S&P North American Technology-Software Index Fund (IGV), continue to outperform the overall market indices (see table.) Although these companies and their stocks have been negatively impacted by the recession, IT spending and the bear market, they are in a stronger position than other industries and companies to weather the economic storm.
First, in general, these companies are relatively debt free and generate a positive cash flow even in hard times. Second, although new contracts and upgrades may be delayed, many software firms have a steady stream of “maintenance” fees and professional services. Finally, you could consider these firms the “consumer staples” of the business world. Most of these firms sell software that businesses use to operate, improve productivity and manage/improve performance.
Source: Seeking Alpha (Feb 25, 2009 - 6:33 AM EST)
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