Adobe Systems (NASDAQ:ADBE) has had a pretty good run for the past three years. It’s up more than 200%, or nearly 70% a year.
And the thing is, it has been a consistent growth pattern. In the past 12 months, it’s up nearly 70%. Year to date it’s up 45%. Meanwhile, over than same three years, Microsoft (NASDAQ:MSFT) is up around 150% and Apple (NASDAQ:AAPL) is up around 105%.
That seems kind of hard to believe. AAPL is constantly in the news, most recently as people huddled around the ticker waiting for it to be the first company to hit a $1 trillion market cap. We hear all about new iPhones and Apple TV and watches.
On the MSFT side, we hear about how well its cloud business is coming along and how its new laptops are finally rivaling the hip laptop leader, Apple.
But zip about Adobe.
ADBE stock is outperforming its big-name compatriots significantly, but it still maintains a relatively low profile.
And that’s good for us. It means there are no talking heads chattering about what it should or shouldn’t be doing. No traders diving in and out of the stock for short-term gains.
What Makes ADBE so Strong?
One of the real secrets to ADBE’s current success happened about six years ago, when it decided to scrap its widely used and admired digital media and publishing solutions.
Before then, you bought its various publishers, photo editors or design programs on disk, uploaded it to your computer and used that until a new edition came out. But by 2012, SaaS (software as a service) was starting to show up on the scene and ADBE made a big move. It switched its entire platform over to an SaaS model.
That meant, instead of making money on new versions of its software packages, all that software would be available by subscription. And that meant customers could pick and choose what they wanted and pay a monthly fee that would include free upgrades as they came out.
What’s more, it meant that ADBE would then see what programs people were buying the most and bundle them for better sales opportunities. And, by going with an SaaS model, ADBE could also increase its margins since it no longer had to burn disks, print operating manuals, and distribute it all.
But given the size of ADBE, this was a significant risk. Some companies its size were dabbling with the model, but few were transitioning their entire business model.
Looking back, it was a brilliant move that opened up new opportunities for the company and allowed it to transition into the new mobile age seamlessly. It now has division that’s dedicated to enhancing digital marketing strategies and is one of the top players in the 3D printing space.
Adobe’s transition to the cloud wasn’t just timely. It was executed remarkably well. And that shows ADBE has some very good managers to go along with its visionaries. This is a crucial balance that companies of all find challenging. But in the case of Adobe it has paid off and will continue to pay moving forward.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
