With all due respect, I realize that my bank clients and private equity clients care a lot about the performance of their investments in the stock market. I'm simply saying that as an advisor to banks that are searching for a new core applications software or service company, I deal with 814 criteria in making my final recommendation. The price performance of a vendor's stock is not one of the 814.That's not to say I don't play a game with stock prices once a year. There are two exhibits (out of 80) in my report that track stock prices. One is year-to-year, and the other is for the past 11 years. This is the story that one exhibit tells.
The period tracked is from April 15, 2007 to April 15, 2008. The IRS had nothing to do with my choice of dates. It's just a date close to the cutoff date of my publication. There are 71 hand-picked vendors of tech software and services in the report. "Hand-picked" doesn't mean I'm an elitist. Every year I invite companies that I believe have something good to offer financial institutions in the conduct of their technology-based operations. Some first-time invitees give me the brush-off, or they're too busy to bother, or they say, "We get ten requests a day." Suffice it to say I sure do have a bias for the 71 hand-picked. They range from IBM at $99 billion in revenue to small privately held companies that do $1 to $5 million in revenue. The small companies earned a place in the report, and the reasons are very obvious as one reads their company profile.
28 of the 71 are public companies. 12 are public companies whose entire business (or at least 95%) is bank IT-related. This year, only 3 of the 12 showed an increase in the value of their stock. They are: Yucheng Technologies (YTEC) 74% Bottomline Technologies (EPAY) 17% Computer Services, Inc. (CSVI) 6%
Whether performance as a tech company serving FIs and performance of a tech company as an investment have any logical correlation is for others to decide. Bank tech vendors have their job cut out for them during good times and bad times. And it's pretty certain that 16,881 financial institutions in the U.S. aren't going to scale back their IT engines the way mom controls the thermostat when energy prices hit the roof.
Disclaimer: Art Gillis is not an investment analyst, even though he delivers answers to questions from 92 private equity firms. He also admits that he doesn't understand the ups and downs of the stock market, and thus, uses his bank to manage the household's investments.