5 Best Software Stocks To Buy According To Billionaire Chase Coleman

4. Elastic N.V. (NYSE: ESTC)

The software application company Elastic N.V. (NYSE: ESTC) has been a member of Tiger Global Management’s portfolio since the fourth quarter of 2018. Share of ESTC fell 9% so far this year. Despite the latest selloff, its stock price is still up 144% in the last twelve months. The tiger cub’s hedge fund held more than 4 million shares of Elastic at the end of the latest quarter.

Greenhaven Road Capital, which generated a spectacular net return of 105% in 2020, highlighted a few stocks including Elastic in the fourth-quarter investor letter. Here is what Greenhaven Road Capital stated:

“This open-source software company monetizes a very small subset of their users. Therefore, CEO Shay Bannon is fighting a different fight than most software entrepreneurs. Elastic’s open-source model provides the community far more value than it extracts. Earlier this month, the company made a change to their licensing agreement, which will make it more difficult for others to commercialize Elastic’s software. The EV/sales multiple has clearly risen over the past year as the share price has roughly tripled our initial purchases at the end of 2019. The company prices software based on usage and benefits from the continued growth of data as well as their expanding product lines. With net revenue retention (purchases from their existing base of customers) remaining above 130% since before their IPO, Elastic has a long runway of 30%+ growth that should mute the impact of multiple compression when it occurs.”