Increasing concerns on high inflation, weak job growth reports, and surging COVID-19 cases have caused increased volatility in the markets in the past week. As investors seek ways to protect their portfolio from a potential correction, it is wise to bet on fundamentally-sound software stocks SS&C Technologies (SSNC), Open Text (NASDAQ:OTEX), Progress Software (NASDAQ:PRGS), and Mitek Systems (NASDAQ:MITK).Tech giants have reported impressive earnings growth in the last quarter, owing to surging demand for its products amid a continued hybrid working environment and rapid tech integration in virtually every industry. However, factors like high inflation, the rapid spread of the highly infectious omicron variant, weak job growth reports for November, and the Federal Reserve’s tightening monetary policy made the markets witness a sell-off last Friday, with the tech-heavy Nasdaq Composite losing 1.9%.
As these factors could keep the market under pressure in the near term, it is wise to bet on fundamentally-sound software stocks to hedge investors’ portfolios from an anticipated market correction, given its long-term growth prospects. Also, growing interest in AI, machine learning, cryptocurrencies, fintech, data analytics, and AR/VR should foster its growth. The global software market is expected to grow at a 7.2% CAGR to $823.71 billion by 2026.
Fundamentally-sound software stocks SS&C Technologies Holdings, Inc. (SSNC), Open Text Corporation (OTEX), Progress Software Corporation (PRGS), and Mitek Systems, Inc. (MITK) have the potential to cash in on the industry tailwinds and deliver solid returns in the near term.