Here’s Why You Should Hold Tyler Technologies (TYL) for the Long Term

Brown Capital Management, an investment management company, released its “The Brown Capital Management Mid Company Fund” first quarter 2024 investor letter. A copy of the letter can be downloaded here. The Mid Company Fund (Institutional shares) returned 5.21% in the quarter underperforming the 9.50% return for the Russell Midcap Growth Index. The strategy focuses on companies that offer mission-critical products and services that save time, lives, money, and headaches. In addition, check the fund’s top five holdings to know its best picks in 2024.

The Brown Capital Management Mid Company Fund highlighted stocks like Tyler Technologies, Inc. (NYSE:TYL), in the first quarter 2024 investor letter. Tyler Technologies, Inc. (NYSE:TYL) offers integrated information management solutions and services for the public sector. The one-month return of Tyler Technologies, Inc. (NYSE:TYL) was 2.60%, and its shares gained 20.56% of their value over the last 52 weeks. On June 24, 2024, Tyler Technologies, Inc. (NYSE:TYL) stock closed at $491.57 per share with a market capitalization of $20.87 billion.

The Brown Capital Management Mid Company Fund stated the following regarding Tyler Technologies, Inc. (NYSE:TYL) in its first quarter 2024 investor letter:

"Take Tyler Technologies, Inc. (NYSE:TYL), a leading provider of end-to-end software solutions for local governments and public sector clients. The company’s software helps automate and control key back-office processes that are essential to the day-to-day functioning of states, cities, counties, school districts and local agencies. In each of the company’s most important product categories—ERP & financials, courts & justice, public safety, and appraisal & tax—Tyler’s solutions are truly mission-critical to its customers, who could not operate without these offerings. For example, the company’s flagship product, Enterprise ERP Software, is a comprehensive suite encompassing all core functions including payroll, procurement and human resources, essentially serving as the engine that runs the financial management of government entities. Tyler’s court-case management systems enable the basic functioning of the judicial system by scheduling cases, organizing documents and communicating with all necessary constituencies. In public safety, Tyler’s computer-aided dispatch system is crucial for saving lives by routing incident calls and deploying responder personnel. Lastly, for local governments, property taxes are their most important revenue stream, and Tyler’s solutions manage the entire process, from property appraisal to tax billings to collections. Without any of these products from Tyler, local governments would be unable to fulfill their fundamental functions that impact citizens’ daily lives.

Because of the essential nature of its offering, Tyler embodies the attractive investment qualities we look for in EGCs. Even during recessions and periods of economic stress, demand for the company’s offering is resilient because governments still need to perform their basic operations. As such, Tyler’s revenue is largely recurring, and its customer relationships can often be measured in decades, with industry-leading client retention of 98%. By focusing exclusively on the public sector market, Tyler possesses a deep understanding of the complex needs of state and local governments and ensures that customers save time, money and headaches through more efficient software and reductions in required labor. Unlike competitors who offer only single-point solutions, Tyler’s comprehensive and integrated offering not only strengthens its customer relationships but also creates cross-selling leverage advantages across its product suite. Furthermore, with current penetration of less than 10% of software systems deployed at state and local government entities, Tyler has a long runway for future growth."

A close-up of a businessman in corporate attire discussing financial management solutions with a client.

Tyler Technologies, Inc. (NYSE:TYL) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held Tyler Technologies, Inc. (NYSE:TYL) at the end of the first quarter which was 29 in the previous quarter. Total revenues of Tyler Technologies, Inc. (NYSE:TYL) for the first quarter were $512.4 million, representing an 8.6% increase compared to the previous year quarter. While we acknowledge the potential of Tyler Technologies, Inc. (NYSE:TYL) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We discussed Tyler Technologies, Inc. (NYSE:TYL) in another article and shared the list of best mid-cap tech companies in the US. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.