The rapid technological advancements and digital transformation over the past 18 months have propelled the software industry’s growth. And the continuing hybrid working environment and growing need to improve business processes should help the industry continue growing. Therefore, we believe now is an opportune time to bet on fundamentally sound small-cap software stocks CSG Systems (CSGS) and Magic Software (MGIC). These stocks are rated Strong Buy in our proprietary rating system. So, let’s discuss.Businesses have been updating their processes to keep pace with the market’s shifting expectations and to enhance user experiences. Many companies are considering significant new investments in advanced software solutions. Furthermore, hybrid cloud adoption is expected to accelerate next year to support employees and companies as the world’s dependence on software solutions increases.
The trends in cybersecurity measures, customer retention, low-code development adoption, and other software solutions should propel the industry’s growth. And investor optimism about the software industry is evident in the iShares Expanded Tech-Software Sector ETF's (IGV) 19.2% returns over the past year.
Therefore, we think fundamentally strong small-cap software stocks CSG Systems International, Inc. (NASDAQ:CSGS) and Magic Software Enterprises Ltd. (NASDAQ:MGIC) could be ideal picks now. These stocks are also rated Strong Buy in our proprietary rating system.