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Why You Should Consider Software Stocks as Part of Your Portfolio

We depend on the power of software as part of our daily lives. Whether it's refilling a prescription, performing a web search, or even connecting with friends and family over video chat, software plays a critical role. For investors, this provides a rich landscape of companies to invest in. On an episode of "The Wrap" on Motley Fool Live recorded on Feb. 18, Brian Withers explains why you should consider adding software stocks to your portfolio if you haven't already.

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Jason Hall: Brian Withers, let's talk about the power of a software platform. I think you touched on this earlier, but it's important to highlight this.

Brian Withers: I have. Just going through Twilio's (NYSE: TWLO) earnings from yesterday night, it just blows me away that over a five-year period, a company can 10X their revenue and they haven't 10Xed their staff. Software is an incredibly scalable thing to allow you to reach a global audience in a very quick period of time.

We've seen it with Facebook, we've seen it with Google [parent company Alphabet], and there are so many other Cloud companies that are coming to bare, we talked about Cloudflare today, that are coming and taking advantage of how easy it is to adopt these things and really bring value to customers really fast without having to ship it.

Think about Peloton, they were having trouble making bikes, they could've made way more revenue, they could've shipped stuff through the ports and got their manufacturer up faster. These companies that have software platforms aren't gated by physical manufacturing and distribution constraints.

If software isn't part of your portfolio, I would take a look.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Brian Withers owns shares of Alphabet (A shares), Alphabet (C shares), Cloudflare, Inc., and Twilio. Jason Hall owns shares of Alphabet (A shares), Cloudflare, Inc., and Twilio. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Cloudflare, Inc., Facebook, Peloton Interactive, and Twilio. The Motley Fool has a disclosure policy.


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