Shares of cloud-based customer-relationship management, or CRM, software giant Salesforce.com (NYSE: CRM) have recently been trading near all-time high levels, and they still appear to have plenty of room for growth.
Salesforce.com recently lifted its revenue forecast for this fiscal year and offered investors an optimistic outlook for its next fiscal year, expecting year-over-year revenue growth of about 20%.
The company has been a major beneficiary of the growing work-from-home trend. As businesses have closed their offices due to coronavirus-related safety concerns, they have ramped up their spending on cloud software. Even post-pandemic, spending on remote-work solutions is expected to remain elevated.
The company also offers artificial intelligence and data integration technology, supplying tools that help companies collect and effectively analyze ever-growing amounts of data from disparate sources. It is also home to the widely used business collaboration platform Slack, which it recently acquired. Salesforce has made Slack the central platform for its Salesforce 360 CRM software suite, and it’s expected to help bring in customer deals and expand on existing ones.
Salesforce has been delivering strong profit growth for shareholders, and it appears to present a compelling opportunity for long-term investors. (The Motley Fool owns shares of and has recommended Salesforce.com.)
Ask the Fool
Q: What’s a spousal IRA? – C.R., Alpharetta, Georgia
A: It’s a traditional or Roth IRA, but one belonging to a partner in a marriage with little or no income in a given year.
In general, IRAs may only be funded with earned income – not with, say, dividend or pension income, or an inheritance. So those who may be out of the regular workforce, perhaps in order to care for children or parents, are largely out of luck – unless they’re married.
A married person with little or no income may qualify for a “spousal IRA” if their spouse has sufficient earned income. The contribution limit for IRAs is $6,000 for the 2021 tax year, plus an additional $1,000 for those 50 and older. So most married couples filing jointly (there’s an income cap) may park between $12,000 and $14,000 in their IRAs for 2021. IRAs are a powerful way to save for retirement.
Q: What are leveraged ETFs? – B.W., Coeur d’Alene
A: They’re stocklike investments that can prove ruinous to your wealth if you don’t understand them well.
To back up a bit, remember that in the finance world, the word “leverage” refers to debt. Leveraged ETFs will often track an industry or a stock index, investing in those stocks with a lot of borrowed dollars in order to amplify returns. A “2X” leveraged ETF, for example, will aim to deliver doubled returns.
The use of debt can amplify losses as well as gains, though, and leveraged ETFs are meant to be held for very short periods; holding on longer can lead to massive compounded losses.
Fortunately, most ETFs are not leveraged, and many are solid investments to consider.
My dumbest investment
My dumbest investment was in Netflix. I bought my shares at $7 and then sold them at $15. I thought I was a genius. – L.C., online
The Fool responds: Well, you did double your money, which is a lot better than many people do with their stocks – especially those who invest for relatively short periods, as you likely did. But you’re right to regret having sold the shares, because Netflix has been a phenomenal long-term investment.
Over the past 10 years, its shares have gained more than 3,600% – or close to 44% annually, on average. Over the past 19 years (Netflix went public in 2002), they have gained more than 150,000%, or 47% annually – far more than the S&P 500’s average annual gain of 11% over the same period. Netflix’s 19-year gain is enough to have turned a $10,000 investment into more than $5 million. Wow.
Stop banging your head on the table, though – you couldn’t have known 10 or 19 years ago how Netflix would perform. Indeed, in 2011, after the company announced it would spin off its DVD-by-mail operation to focus on video streaming, its stock sank some 75%. It was hard to imagine how well it would recover. You can’t know just how your stocks will perform over the long run, but aim to hang on to them for a long time while keeping up with each company’s developments.
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