Salesforce.com (NYSE:CRM) has been churning out new high after new high over the past 12 months. Before that, many began to doubt CRM stock due to its lofty valuation despite solid growth. Some still do. However, the cloud-computing wave has begun to accelerate, driving all sorts of names higher.
While Adobe (NASDAQ:ADBE), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), CRM and a slew of others are enjoying the ride, so too are a number of smaller companies.
That surprisingly, is what may be helping to drive CRM stock higher, too.
A Look at Salesforce’s Investments
At year-end 2017, Salesforce owned roughly 888,500 shares of Twilio (NYSE:TWLO). On the last trading day of 2017, Twilio stock closed at $23.60. Shares are now trading hands at around $60, up around 155% in less than six months!
But CRM’s big gain in TWLO isn’t its only investment. It’s also got a position, albeit much smaller, in Mongodb (NASDAQ:MDB) with ~45,000 shares. Just like TWLO, the company has not altered its position in MDB. And like TWLO, MDB has been on a big run, too, ending 2017 at $29.68 and now currently trading at around $59.
While 45,000 shares out of 24.7 million total outstanding in MDB and 888,500 shares out of 71.9 million total outstanding in TWLO isn’t insignificant, they pale in comparison to Dropbox (NASDAQ:DBX).
Dropbox has been going on a huge rally over the past few days, up more than 40% in a week. There’s no explanation (yet) for this rally, but it’s benefiting CRM stock. Salesforce owns more than 4.9 million shares of Dropbox, which has an outstanding share count of just 73.8 million. All three investments can be found in Salesforce’s most recent Form 13F filing.
According to its 10-Q, Salesforce had $677 million worth of assets listed under “strategic investments” on its balance sheet as of Jan. 31, 2018. As of the most recent filing, that figure has swelled to $1.024 billion, a jump of almost $350 million.
Of course, that includes its full investment in DBX, a stake it agreed to take pre-IPO for $100 million. That’s now valued at over $200 million.
In short? CRM’s investments in TWLO, DBX and MDB have more than doubled so far in 2018. So if CEO Marc Benioff isn’t good at sizing up talent and companies, well then, he’s damn good at buying low and selling high.
Trading CRM Stock
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So Benioff is good at buying stocks, but are you good at buying his company’s stock?
CRM stock is as plain and simple as it gets. Simply put, you buy this name on pullbacks into the 75-day moving average. It’s the only moving average shown on the chart above, accompanied only by a few blue ovals where CRM stock pulled back and hit the moving average.
Pick any one of those ovals, a combination of them, or all of them, and it doesn’t matter. If investors had bought any of them, they’ve made money.
More aggressive bulls can buy on pullbacks to the 50-day moving average (which has more tests than the 75-day, obviously). Conversely, more conservative bulls can buy CRM stock on pullbacks to the 100-day moving average, (which has less tests than the 75-day, obviously).
Like we said, the point is all the same and very simple: We buy CRM stock on pullbacks. Until the trend changes, it is our friend. Is Salesforce a bit extended? Yeah, you could say that. The arrows on the chart show when CRM stock has an RSI north of 70, like it does right now.
Despite it trading well on Tuesday in the face of a tough market selloff, it’s likely due for a pullback, as that’s what history would suggest. Business is going well, and the cloud continues to churn out strong gains. Until that changes, CRM stock remains a buy.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a position in CRM.
