Key insights
- The article discusses the lack of buying activity in SaaS companies by prominent value investors despite significant price declines. This suggests potential concerns about the long-term growth prospects or competitive landscape within the SaaS sector, even at seemingly attractive valuations. This hesitancy could signal a broader market skepticism towards the sustainability of SaaS business models.
SaaS companies such as Adobe (ADBE), Intuit (INTU), Salesforce (CRM), and Constellation Software (CNSWF) have recently fallen more than 50% from their all‑time highs. At these levels, valuations appear far more attractive than they’ve been in years. Yet many well‑known value investors like Berkshire Hathaway, Li Lu, Chris Hohn, and others, have not been buying into the sector. Why is that?
I’m aware that Mohnish Pabrai recently invested in Constellation Software and related companies, and that Chuck Akre has held Constellation and Topicus for a long time. Pabrai has spoken highly of Akre, so his move may have been influenced by Akre’s long‑term success with the company. But outside of these isolated cases, we haven’t seen much buying activity from other major investors. What explains this lack of interest?