Fellow stock-pickers, definitely-not-gamblers, future Buffetts and future bankrupts, let me ask you a question:
**Are software businesses that provide a digital system the best software businesses to own? Why?**
To avail the unenlightened amongst us of their blushes: a system of record (SoR) is, essentially, database that stores the “master data” of a particular type of record — the “golden source”.
Personally, I think SoR businesses are the top tier of software. It’s by construction an extremely sticky business model that can command a high price because it delivers critical functionality—nobody wants to lose their master data! Looking ahead, these businesses are in great positions to leverage the unique and proprietary data they are custodians of to either train their own niche LLMs or to provide customised LLM training as a service to their largest customers.
Some SoR companies that stand out to me are listed below. I have positions in some but not all of them. What stands out to me is that they are industry leaders and largely uncontested in the enterprise context. Of course, I also like that some of them are significantly cheaper than they have been in the past, but without any material adverse changes to their core business (so far).
I welcome suggestions for other SoR-companies worth looking at!
\- Salesforce (customer data)
\- HubSpot (customer data)
\- Workday (employee data)
\- Adobe (Creative Cloud for design assets, Document Cloud for documents and document templates, Experience Cloud for user analytics)
\- ServiceNow (IT operations data)
\- Okta (enterprise identity data)
\- SAP (they make and deploy ERP software, which is an accounting SoR)