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TheStreet Open House

Four Must-See Charts: Software Stocks

The software sector is starting to heat up in a serious way, and many market participants are missing out on the action.

Jim Cramer brought attention to the under-the-radar move in the sector on Thursday's "Stop Trading!" segment on CNBC. Cramer told viewers that the software stocks are exploding here, and you don't hear a word about them. He mentioned that names such as Oracle (ORCL), Microsoft (MSFT) and (CRM) are starting to get very active to the upside.

The big names in the space such as Microsoft and Oracle aren't the only ones that are starting to advance. Just take a look at the action in smaller-cap companies such as Merge Healthcare (MRGE), up 195% on the year, or LivePerson (LPSN), up 91%. This clearly demonstrates that investors are bargain-hunting in many of the beaten-down names and finding value as the big and small companies are being bid up to higher prices.

The software complex is also starting to heat up from an M&A standpoint. Data-storage giant and software maker EMC (EMC) is battling it out with competitor NetApp (NTAP) to buy storage appliance and software firm Data Domain (DDUP) for at least $1.8 billion. Just last week, Intel (INTC) said it would buy testing and development software maker Wind River Systems (WIND) for $884 million.

There are even rumors that Dell (DELL) is actively looking to do some deals to expand its portfolio in storage-related hardware, software and services. Like many large-cap tech companies, Dell is sitting on billions in cash that could be best put to work by buying up cheaper tech companies at depressed levels. Some rumors have Dell looking to buy out Palm (PALM) and some other potential targets include Emulex (ELX) and QLogic (QLGC).

Considering the M&A activity and the positive price action in the software sector, how should investors look to play this space? Let's take a look at a few software stocks that look enticing based off of their charts.

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