Investors are hunting for value in a part of the market that was once a growth darling: Software
Investors are starting to find value in an area of the market that not too long ago was heavily associated with growth: software. The group has struggled to keep up with the broader market in recent years. The iShares Expanded Tech-Software Sector ETF (IGV) tumbled 35.7% in 2022 and virtually matched the S & P 500’s performance in 2024. And despite it soaring 58% in 2023, it only gained 5.6% last year — and has tumbled 20% in 2026. This year, investors have dumped software names as they search for companies vulnerable to obsolescence. IGV is also more than 29% below its 52-week high. However, this latest setback has attracted stock pickers who think some names have been unfairly sold off. The IGV has staged a bounce back in April, rallying more than 8% month to date. “Oftentimes, you have sort of the proverbial babies being thrown out with the bath water when its entire country or sector goes on wholesale. One area that has been quite fruitful for us lately has been software,” said Christian Heck, deputy head of global value at First Eagle Investments. “They have massively sold off on AI fears.” IGV YTD mountain IGV year to date Hunting for value First Eagle Investments’ Heck and Julien Albertini, who are both deputy heads of global value at the firm, said Workday is one software name they believe has been unfairly punished. It’s a holding in the firm’s First Eagle Global Fund (SGENX), which has $75.3 billion in assets under management and is rated five stars by Morningstar. It’s in the top quartile among its peers, on a 1-year, 3-year, 5-year and even 10-year basis. It’s returned roughly 33% over the last year. It has an adjusted expense ratio of 1.1%. The human capital management firm that manages hiring, onboarding, benefits and compensation services for roughly two-thirds of Fortune 500 companies, meaning that the business is highly entrenched within the largest U.S. corporations. In fact, Workday is so essential that it’s considered a “system of record,” or the authoritative database that acts as the primary ledger for business data, according to Heck and Albertini. It’s also massively corrected at this point, off more than 53% off its recent high. It’s also trading at a forward price-to-earnings ratio of 11, putting it at a steep discount to the S & P 500’s multiple of around 23. “Yes, some software companies probably will run into some trouble,” Heck added. “But for selective, bottom up investors like ourselves, we can find some where we think they’re actually quite entrenched and protected.” WDAY YTD mountain WDAY in 2026 There are a number of characteristics investors searching through the wreckage are looking for. These include companies with a competitive moat, have strong branding and proprietary data, and are deeply entrenched within their industries. One name identified recently by JPMorgan as a buying opportunity is Adobe . The software stock has rebounded more than 5% this month, amid growing signs of confidence in the stock. Adobe’s board on Tuesday showed its own belief in the business outlook and the stock, authorizing a new $25 billion share repurchase program. Nvidia CEO Huang added to the bullish revival in his keynote address at the Adobe Summit 2026 Investor Session, saying “For 99.9% of creators in the world, this [agentic system] is going to elevate your art,” according to a JPMorgan note on the speech. Gil Luria, analyst at D.A. Davidson, said ServiceNow , Dynatrace and Box are among the names he favors, as they trade below 20 times cash flow, and are demonstrating good growth and resilience. And while ServiceNow dragged the software space lower on Thursday with a 17% drop, he said “all three of them are market leaders in their category.” He also likes Microsoft , Oracle and Snowflake . “I wouldn’t go as far as endorsing the entire category. It is a category that’s going to be disrupted. Many of the companies will fall by the wayside,” Luria said. “But many of the companies will succeed, just like any other era of technology disruption.”
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