The Best Software Stock to Buy Now

If the top stocks usually yield the top returns, then it pays to know what our 110,000-strong Motley Fool CAPS community likes right now. Here are their five favorite software companies:

Top Software Stocks

Price as of 6/24

CAPS Stars (Out of 5)

One-Year Return

GlobalScape

$1.88

*****

(49.6%)

Double-Take Software (Nasdaq: DBTK  )

$13.75

*****

(13.3%)

Infosys Technologies (Nasdaq: INFY  )

$43.92

****

(12.5%)

CryptoLogic (Nasdaq: CRYP  )

$14.29

****

(41.8%)

Adobe Systems (Nasdaq: ADBE  )

$41.38

****

1.3%

Sources: CAPS, Yahoo! Finance.

Fascinating, isn't it? Premium-priced winners such as VMware (Nasdaq: VMW  ) and NetSuite (NYSE: N  ) don't even make the top 10.

GlobalScape gets the nod instead. CAPS All-Star johnkernan22 says it's "truly a hidden gem." His reasoning? Fundamentals. GlobalScape's returns on equity and invested capital exceeded 25% over the trailing 12 months. That's a good sign.

Still, although I recognize that high-performing micro caps can make you rich, I have two problems with GlobalScape. First, it specializes in file-transfer software -- programs for uploading documents and other stuff to the Web. There's very little that's unique about FTP; free tools are easy to find. Second, the top software investors have bypassed GlobalScape in their CAPS portfolios. Behold:

Top Software Investors

CAPS Rating (Out of 100)

Owns GlobalScape?

Track2006Wired40

97.76

No

wgthom

92.85

No

tbolioli

92.25

No

troglodytes82

99.14

No

x3abodx

72.23

No

Source: CAPS.

To be fair, GlobalScape is a micro cap and as such can't be rated right now in CAPS. But it was ratable not long ago; 85 CAPS investors still "hold" shares -- only one is bearish.

Take it from the top
So if GlobalScape is out, which software stock should you buy now? Our top five investors might say Apple (Nasdaq: AAPL  ) , which, interestingly, is ranked just below Adobe in the top 10.

Each of our software superstars believes the Mac's daddy will beat the S&P 500. Here's how tbolioli pitched the stock in December, in a re-up from a successful pick in September 2006:

This one is a triple bagger for me ITRW (in the real world). Too bad I cannot pick it up for $20 here. Still has room to grow and the company has matured in how it approaches products and product development. The iPhone is only the beginning in the mobile space.

Fool co-founder David Gardner agrees. He made Apple a pick for Motley Fool Stock Advisor in February.

I, too, would be buying if I could ever stop writing about the company. My thesis is that the iPhone will catapult Apple products into the enterprise as never before. The new MobileMe software will help. (It's worth a mention, since we're supposed to be talking about software in this column.)

But that's my take. What's yours? Use the comments box below, and then let your opinion be heard by rating stocks in CAPS. Click here to get started; it's 100% free to participate.

Cap off your day with related CAPS Foolishness:

Apple and Double-Take Software are Stock Advisor selections. CryptoLogic is a Motley Fool Hidden Gems pick. VMware is a Rule Breakers recommendation. Try any of these market-beating services risk-free for 30 days.

Fool contributor Tim Beyers, who is ranked 20,171 out of more than 110,000 participants in CAPS, is a regular contributor to Fool.com and a member of the market-beating Rule Breakers team. Tim didn't own shares in any of the companies mentioned in this article at the time of publication. The Motley Fool's disclosure policy is a little bit software. Its trading guidelines are a little bit hardware. Together, they make beautiful music for investors.


Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 25, 2008, at 6:23 PM, FoolishLav wrote:

    Hi, Tim,

    You must force yourself to close shop on AAPL posts for 10 days and get yourself some!

    Investors and traders seem so distracted by oil prices and floods and fires, etc., that they cannot see the immanent explosive release of new iPhone and app store phenomenon, followed by a couple of quarterly reports that will catapult this stock price to the moon, and beyond. That will get their attention again.

    On the Apple board there is a prevailing opinion, I believe, that OS X and Safari are keys to Apple Inc. establishing a new paradigm of consumer software dominance.

    I predict that you will find Apple software in the dash of your new car in the not too distant future.

    Lavrentii

  • Report this Comment On June 26, 2008, at 1:18 PM, JustAnFYI wrote:

    There is a misconception here. GlobalSCAPE not only makes software for transferring files to a webserver but more importantly provides software to securely (FIPS) transfer files beteewn business entities, partners and/or remote offices. In addition the provide software that securely syncs up shared files over a WAN. GlobalSCAPEs' sales for the basic FTP clients remain steady but Enterprise level sales are increasing on a steady pace. This, along with a strong financial base equates to strong profits in the future.

  • Report this Comment On June 26, 2008, at 1:44 PM, adamsto wrote:

    There are solid reasons why NetSuite does not make the top 10 on this or anyone else's list. Horrendous customer service and business practices and almost total data lock in. You can read about it here. http://www.d-toolsblog.com/?p=213

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