Unity Software (U) and Datadog (NASDAQ:) are both in the Software industry group, and both have posted strong quarter-to-date performance, easily outperforming their tech peers. While Datadog is a data observability service for cloud-scale applications, Unity is a video-game software development company founded in Denmark. Taylor Dart explains why these stocks are a buy.It’s been an incredible year thus far for the (COMPQ), with the index up more than 16% year-to-date and many tech stocks up as much as 50%. This relentless rally has made it difficult to find growth at a reasonable price and also challenging to find names that aren’t extended from recent breakouts. However, while most names are un-investable at current levels, this is an opportune time to begin building shopping lists. This is because it’s quite possible we could see a correction before year-end to wring out some of the excess bullish sentiment, and it’s always better to be prepared ahead of time. In this update, we’ll look at two attractive tech names with industry-leading growth rates and ideal buy points if we do get a sharp correction:
Unity Software (U) and Datadog (DDOG) are both in the Software industry group, and both have posted strong quarter-to-date performance, easily outperforming their tech peers. While Datadog is a data observability service for cloud-scale applications, Unity is a video-game software development company founded in Denmark. With revenue growth rates of 67% year-over-year and 48% year-over-year, respectively, both companies are seeing exceptional growth and are in the sweet spot from an institutional investment standpoint. This is because Datadog just turned profitable last year with positive annual earnings per share [EPS], and Unity will flip to positive EPS in early 2023. From an investment standpoint, the move to profitability should lead to continued institutional accumulation, given that some growth funds wait for stocks to post positive earnings growth before building positions. This is evidenced by recent fund flows, with funds holding Unity up more than 50% from Q1 to Q2, and Datadog ownership up sharply as well (997 funds vs. 964 funds). Let’s take a closer look at both companies below:
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