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Time to Put a Little “SaaS” in Your Portfolio: JMP’s Lehmann

Time to Put a Little “SaaS” in Your Portfolio: JMP’s Lehmann

Everywhere you turn these days it seems as if there is something big going on in a small corner of the technology industry.

Whether it's hot IPOs, big name acquisitions, or huge earnings surprises, there's definitely a buzz going on in the Software as a Service industry, which is often referred to as "SaaS."

According to Mark Lehmann, president of JMP Securities, these SaaS players represent "a new breed subscription software companies" that are taking the web-based appeal of cloud computing and combining it with good old fashioned innovation to bring technology to new places.

"When you see this growth of new ideas, you kind of scratch your head and wonder why the old guard, who are so well capitalized and so well entrenched and have such great people working for them, doesn't get there," Lehmann says in the attached video, calling the latest phase of industry reinvention "a metaphor for the overall technology market."

While Salesforce.com (CRM) is probably the biggest and best known company in the industry, he says a bunch of smaller companies have recently gone public with great success.

They include names such as Workday (WDAY), which has more than doubled since its IPO priced at $28 in October 2012.

Other new and notable SaaS movers Lehman likes include Tableau Software (DATA), which has gone from $31 to the mid-$50s since pricing one month ago. And Marketo (MKTO), which offers marketing automation software, and priced at $13 in mid-May and was last trading at about $18, albeit down from a high of $26. Also Textura (TXTR) which rose 68% in its first day of trading last week. At the same time, SaaS stock ExactTarget (ET) was just acquired by Salesforce.com after just one year of trading on the Nasdaq.

"It just shows you what kind of attention investors are paying towards this sector, and these high growth companies," Lehmann says, predicting there will be more IPOs, acquisitions and deals to come.