HOLD – Positioning Your Portfolio in a Shifting Software Industry

Core Insights - The software sector is undergoing significant changes, necessitating an understanding of future winners in the industry [1][2] Group 1: Shifts in the Software Industry - The emergence of agentic AI marks a pivotal shift in the software landscape, differentiating itself from generative AI by being more autonomous and not requiring prompts [3][4] - The narrative that the "Software as a Service" (SaaS) era is over is driven by three main factors: the rise of AI lowering entry barriers for new software companies, outdated pricing models, and challenges in maintaining data moats [5][6][7] Group 2: Evaluating Software Companies - Key factors for identifying strong software businesses include pricing power, expanding markets, and robust competitive environments, with a particular emphasis on the quality of a company's moat [8][9] - Durable moats are becoming increasingly important due to rising competition and lower barriers to entry in the software industry [9] Group 3: Investment Strategies - Actively managed ETFs can capitalize on opportunities within the software and technology sectors by adapting to innovations and identifying winners and losers [10][11] - The MFS Active Growth ETF (MFSG) has a significant allocation of 51.66% towards the information technology sector, allowing it to leverage momentum in the tech space while maintaining diversification [12]