After a year that saw cloud-based software-as-a-service (SaaS) stocks skyrocket into the stratosphere, one brand-name company remains attractively valued: Salesforce.com (NYSE: CRM).
Salesforce is the leading global provider of cloud-based customer relationship management software. CRM software is used by consumer-facing businesses to manage customer information, log service and product issues, manage marketing campaigns, and pursue new or add-on sales. Industries using CRM software include not just retail and service but also health care, information technology, finance and manufacturing, among others. The addressable market for CRM software is huge, and it just keeps growing.
A Gartner report estimated that Salesforce controlled 18.3% of the global CRM market at the end of 2019. That’s almost as large a share as the three next-largest CRM companies combined. Salesforce has established itself as the go-to for this rapidly growing segment of the SaaS stock space.
What’s more, Salesforce is in the process of acquiring Slack Technologies for $27.7 billion in cash and stock. The allure of this deal is that it allows Salesforce to use enterprise-focused communications platform Slack as a jumping-off point to promote Salesforce Customer 360.
Shares of Salesforce.com may not look cheap, recently trading at a price-to-earnings (P/E) ratio near 61, but that P/E has often been in the triple digits. Consider Salesforce for your long-term portfolio. (The Motley Fool owns shares of and has recommended Salesforce.com.)
Ask the Fool
Q. Some friends have started trading stocks with a popular app. Is there any downside to that, or should I join them? – A.M., Portland
A. You can join them, but do so with your eyes open: There are both upsides and downsides to services that streamline investing in the stock market.
For starters, when there’s little to no cost to start trading, many people start without learning much about stock investing and how to do it well. Many don’t understand that trading frequently is a bad idea, as it fails to give good companies time to perform, and leaves investors with costly short-term gains (taxed at higher rates than long-term gains). Trading with borrowed money (“on margin”) is another ill-advised idea, especially for beginners, yet some services make that easy.
Investing in stocks can definitely be fun and exciting, but be wary when an investing platform makes it like a game, showing you your “performance” like a score. Those are your hard-earned dollars that are growing – or evaporating. All new investors should be taking the time to research the companies they invest in, instead of just buying what’s popular and hoping for the best. Many new investors have been jumping into “hot” stocks that have been soaring, hoping to see their own holdings soar, too. But few stocks keep growing that rapidly. Plenty will retreat a little or a lot – and may burn many naive investors.
Q. If I donate $100 to charity and my company matches that with another $100, can I claim a $200 deduction on my tax return? – P.H., Parchment, Michigan
A. Nope. You can deduct only what you contributed.
My dumbest investment
My dumbest investment move was selling my shares of Shopify when they were at $150. (They’re close to $1,500 now!) I’d bought them for around $30 apiece and wanted to “lock in” my gains. I’ve since learned to let my winners run. – K.M., online
The Fool responds: Locking in gains, at least some of them, is not a silly thing to do. When you have a huge winner, it grows to make up a much bigger portion of your portfolio, leaving you with many eggs in one basket. Your financial future could depend to a great degree on that one stock, which is risky. Some experts do suggest letting your winners run – after all, a company with huge gains may keep growing for many more years. But if it doesn’t, and it actually falls in value, your portfolio could take a significant hit.
Here’s a good compromise: Consider selling some of your shares and keeping the rest.
That way you do lock in some gains, perhaps even getting back as much or more than you initially invested in the stock. But you’ll still have many shares that can, ideally, keep growing. Shopify, which helps businesses around the world set up and run e-commerce stores, has surged in recent years, with the pandemic-driven growth in online shopping providing a tailwind. Many see a rosy future for Shopify, but view its stock as overvalued these days.
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