Software stocks have a history of pulling back in the second half of the year before going on to outperform the S&P 500. So how should investors think about the latest dip in software shares?
The iShares Expanded Tech-Software Sector ETF IGV has declined 7% from its mid-July peak, and Materne thinks “this pullback is similar to other [second-half] pullbacks in that investors are taking profits in the face of macro uncertainty and we won’t have a great read on IT spending budgets for another 30-60 days.”
For those reasons, Materne is more partial to larger software names that could be better positioned for outperformance when the category recovers. He calls out Adobe Inc. ADBE, -0.38%, Microsoft Corp. MSFT, +0.13%, Intuit Inc. INTU, -0.05% and Palo Alto Networks Inc. PANW, +0.14% as potential winners in that grouping.