Software Shake Up
Mistake free investing has yet to be invented. At Dock Street we have learned that it is how you handle mistakes that counts. Our most recent mistake was Manhattan Associates, a small software company specializing in logistics.
Manhattan reported a very good year in 2024, but at the same time said that customers were “delaying implementation of new projects.” Then they fired the CEO. That was enough—we sold the stock.
Software companies hardly ever hit the wall like this. Customers at Manhattan were either reassessing the value of the software they planned to purchase or changing how they were solving the problems previously addressed by Manhattan. Or both.
Our guess at this time is that Manhattan’s customers have discovered they can write their own code instead of using what they’ve purchased from Manhattan. It could be that Artificial Intelligence tools are allowing these companies to create software that they were formerly purchasing from outside vendors.
If so, many software businesses may be threatened as their customers gain the ability to create software for themselves.
We see this here at Dock Street. Evan and Spencer are routinely writing code to automate small repetitive jobs in the firm. Artificial Intelligence tools are cutting this process down to minutes from days. Throughout the economy more code is being written faster than ever, making everyone in a business more productive.
Massive advances like this cause disruption and pain. Witness Manhattan Associates. But increases in productivity make most employees more valuable to their employers and that means higher salaries over time. Learning more about this process may be the value gained from our latest investment mistake.
Best regards,
Daniel A. Ogden
Disclosure: Dock Street Asset Management, Inc. and/or our clients may own Manhattan Associates (MANH). This article is not intended to be used as investment advice.
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