The Software Stocks That Worked (And Didn't) In 2015

In a new report, MKM Partners analyst Kevin Buttigieg took a look back at the enterprise software industry and discussed investing themes that have worked and those that haven’t in the past two years. Typically, many of the worst performers in a given industry will outperform in the following year (and vice versa), but that trend did not work in enterprise software in 2015.

Some things never change
Of the 21 stocks that MKM covers in the field, 14 of the stocks either outperformed or underperformed in both 2014 and 2015 compared to the NASDAQ. Against the S&P 500, this number jumps to 17 out of 21 stocks. On an absolute basis, 16 of the 21 stocks had the same (positive or negative) returns in 2014 and 2015.

Themes that worked
Many investment groups, such as SaaS, big data and cybersecurity, had both winners and losers in 2015, but MKM notes that several themes mostly worked universally this year. “Themes that worked across all segments in our coverage universe were cloud positioning (which helped names like MSFT and RHT and hurt names like ORCL) and margin expansion (which helped CRM, ULTI and CTXS and hurt names like ORCL and N),” Buttigieg explained.

Related Link: 5 'Bold' Predictions For 2016

Best and worst performers
MKM names Buy-rated salesforce.com, inc. CRM, The Ultimate Software Group, Inc. ULTI and ServiceNow Inc NOW as top 2015 performers that it still likes headed in to 2016.

MKM also still likes two of the worst-performing stocks in the space in 2015: Buy-rated VMware, Inc. VMW and NetSuite Inc N.

Disclosure: the author holds no position in the stocks mentioned.