Technology: August 2024
Looking for real growth at the smaller end of the stock market?
Check out our latest video where we dive into IT. The big ASX stocks in the sector are underwhelming when compared with the Big 7 in the US Market but it's a promising sector on the ASX in smaller stocks.
Discover why small caps like Afterpay and Macquarie Technology caught our attention and have delivered impressive returns!
Top 4 Technology Companies that have delivered Under the Radar Report big returns:
Returned 928%
Afterpay Ltd (APT)
TAKEN OVER
Fintech (acquired by its now parent company Square Inc., but still traded under APT). We first tipped Afterpay for $2.51 in May 2017 before the term buy now pay later was even used. We sold at over $100! The lesson is don't be afraid to buy a small holding on a small cap disruptor.
Returned 720%
Macquarie Technology (MAQ)
Information technology, telecommunications. Macquarie Technology is a full-service provider for business of data, voice, mobile and colocation services. For business customers they specialise in hybrid IT, integrating colocation, cloud and dedicated servers. Different applications need different types of hosting. MAQ is a specialist in cyber security, secure cloud and colocation for the Federal Government.
Returned 668%
DATA3 (DTL)
Information technology, software services. An Australian IT services and solutions provider, Data3 is focused on helping customers solve complex business challenges using technology solutions. It has allied itself closely to Microsoft, and is the only Australian company to have a representative on its global advisory board.
Returned 361%
Infomedia (IFM)
TAKEN OVER
Information technology, software services. Car part catalogue specialist that has successfully fulfilled a niche in a world where cars are becoming increasingly complicated.
High Quality & Independent Research
Investing in Australian tech companies can be an attractive option for many investors looking to gain exposure to a sector that is growing rapidly. The ASX is home to some of the best tech stocks that spans across different industries, including software development, software as a service, cybersecurity, biotech, fintech, semiconductor chips, and more.
Technology companies are some of the most exciting with unlimited growth prospects and the potential to disrupt the sector they operate in. With technological innovation driving fast revenue growth, the focus for investors is on selecting the profitable companies with customers in their market. Many of our top performing stocks have come from this sector.
Other stocks in the technology space include:
Fintech
Zip Co (ZIP)
June 2024
We bought below $2 and sold around $8. In a fast-growing industry, it often pays to back more than one company.
Software
Hansen Technologies Limited (HSN)
June 2024
Software company that services the energy, utilities, and telecommunication industries providing customer-facing solutions.
Med-Tech
Silex Systems Limited (SLX)
June 2024
Uranium processing company developing a low-cost uranium refining process at grades usable in Small Modular Reactors or SMRs, which is being rapidly accepted by many countries as lowered risk alternative to larger traditional reactors.
Why Invest in the Tech Sector?
The list of stocks above shows the positive impact technological change can have on an individual's share portfolio. These tech companies start out small but can be strong growth stocks with fast revenue growth as they often have lower costs to operating compared to traditional brick and mortar business. Their goods and services often don't have raw material input or transportation costs, and are often well positioned to respond and adapt to emerging conditions. Tech stocks are attractive to investors because of their high growth potential, resilience, and their role in shaping the future.
Recent Technological Innovations
Technological breakthroughs happen continuously in different areas. Most recently artificial intelligence (AI), cloud computing, payments, blockchain, biotech, self-driving tech, computers and software, and renewable energy are the big disruptors in recent years. These innovations can drive growth and dramatic consumer behaviour changes. Think of Afterpay (APT) in it's nascent start up phase before Buy Now Pay Later was even heard of. Many companies are forecasting AI as the next big tech sector innovation.
Risks of Investing in Tech Stocks
There are also risks associated with investing in tech stocks, such as volatility, regulatory issues, and competition. Not every company or idea will succeed even if the idea is solid. Furthermore, many tech stocks aren't profitable when they list, and are often working hard to convert their low capital growth, into high leveraged earnings, incurring debt in the meantime.
Investment Strategies:
The technology sector should form part of an overall diversified portfolio. And before investing in any stock, it's essential to conduct thorough analysis and due diligence on the company you are interested in. Look into the company's financial performance, growth prospects, competitive advantages, and management team. Understand the company's products or services, target market, and how it positions itself within the broader market or technology industry.
Dividend investors
Investors might like to remember that many tech companies' stocks do pay dividends. Dividends are also a signal of a profitable, stable, successful company. Remember that the performance of individual stocks can vary, and past performance is not indicative of future results. Always conduct your research and consider your financial goals before investing in any stocks on the ASX.
