I Just Picked Up Two Bargains This Week
Following Tuesday’s selloff, I snagged these technology deals; here's why.
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As I postulated in my column on Wednesday, the big selloff in the markets on Tuesday turned out to be short-lived. Some minor concessions around the sovereignty of land used by U.S. bases in Greenland were enough to calm tensions. Concerns around tariffs remain, but it appears de-escalation will continue. Equities have now clawed back most of their sharp losses from Tuesday over Wednesday’s and Thursday’s trading sessions.
I think it is important as an investor to take every new pronouncement from this administration with a large grain of salt. The POTUS seems addicted to floating trial balloons and throwing out random commentary on a weekly basis. Take his recent push for a one-year 10% cap on credit card rates. An effort to tackle affordability in front of the upcoming midterms and an effort that had the support of U.S. Sen. Elizabeth Warren. Talk about strange political bedfellows.
When this new direction was announced, not surprisingly, it dinged bank stocks. Wednesday, the POTUS stated in his Davos speech that he would be asking Congress to implement his proposed credit card cap of 10%. Which is like saying 'never mind', given the lack of support among most lawmakers, not to mention the power of the bank lobby. Bank shares rallied on the backtrack.
This is why I just chill in reaction to most new policy announcements. I also try to take advantage of lower entry points as the result of whatever the latest tweet or pronouncement brings. I used Tuesday to start positions in two new reasonably priced stocks for my portfolio using covered-call orders.
I picked up an initial stake in social media management software company Sprout Social, Inc. (SPT) . The stock has lost over 90% of its value over the past few years on concerns AI will cannibalize its offerings. But this software as a service company is integrated AI into its capabilities. The stock also has been mentioned as a potential takeover target and has seen some insider purchases as of late as well. Add in a solid balance sheet, revenue growth in the low teens, and growing profitability; 11-times forward earnings is more than a reasonable value in an overbought market.
I also took a starter position in Progress Software (PRGS) this week. The company posted strong Q4 numbers this week. Revenues were up more than 17% on a year-over-year basis and Progress beat bottom-line expectations by 20 cents a share. Most of the company's revenue growth was powered by a recent acquisition of note. Revenue growth going forward is projected to be in the one to three percent range.
The company’s software offerings allow its clients to deploy and manage AI-powered applications and personalized digital experiences. The attractiveness of the stock is its free cash flow, which has grown at a 12% compound annual growth rate over the past half decade and management is targeting over $300 million in unlevered free cash flow in fiscal 2026. The stock’s market cap is just under $2 billion.
At the time of publication, Jensen was long PRGS and SPT.
