2008 Software Stocks: An Oveview Plus The 10 Best and 10 Worst
While software stocks got hammered in 2008, they basically declined "in line" with the rest of the market as the total software market cap was down 40.9% which is just about equal to the NASDAQ's 40.5% decline and just slightly worse than the S&P 500's 38.5% decline. As I noted in my piece on 2008 Software M&A, total software market cap now stands about 25% lower than it was five years ago. Ouch!
Out of 231 year-end stocks in the software sector, the average stock declined -45.8% indicating that large caps out performed small caps during the year. The median stock declined -49.3% or put another way, about 1/2 of all software stocks declined by just about 50% or greater during the year. Yes, it was as bad as you think it was
Just 16 out of 231 or 7% of software stocks managed a gain in 2008. For amusement's sake, here's a list of the Top 10 stocks in 2008:
Top 10 Best Performing Software Stocks of 2008
A couple interesting notes about this list of winners:
- Medical Administration was the clear "Defensive Niche" of the year winner in software. While overall the sector still declined 8.5% (the next best sector, network management, declined 20.4%), it obviously rode out the market much better than anywhere else. Some of this out performance undoubtedly was due to speculation that the health care sector will benefit from an Obama administration. It will be interesting see if that actually turns out to be the case in 2009.
- 6 of 2008's Top 10 actually declined in 2007, a year in which the software sector was up 14.2%. This indicates that most of these "winners" were stocks that recovered from poor fundamental performance in 2007/2006.
- Autonomy and S1 were the only stocks to the make the Top 10 Gainers that also posted double digit gains in 2007. Autonomy was up 72% in 2007 while S1 was up 32.5% in 2008. S1's gain is all the more impressive given that it's core customer base is composed of retail banks.
In terms of losers, the competition was fierce, but a handful of stocks went the extra mile and were able to qualify for the Top 10 Losers in 2008. To gain entrance to this elite group, a stock had to decline by a minimum of 85%!
Top 10 Worst Performing Software Stocks of 2008
Not much to say about this list other than it was interesting to see that three gaming companies made the list (Atari would have made it too but it went bankrupt earlier in the year) which suggests that gaming is indeed a "hit or miss" sector and this year it had quite a few misses
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The thoughts and opinions on this blog are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.