Technology companies are great places to park your investment dollars. While it can be difficult to sort those that 'could be' from those that 'will be', there are many characteristics which make tech stocks enticing prospects for long-term investors, including:
- Scale potential: Unlike many other companies, tech companies have the ability to raise sales exponentially but keep fixed costs low.
- Competitive advantage: If your tech company makes software or hardware, it may have patents or other protections in place to guard it against intense competition.
- Network effect: The more of us that use a service or product, the more valuable that product becomes.
- Wide profit margins: A product of the three points above, technology companies can be intensely profitable because they are 'asset light' and drive the top line (revenue) higher – very quickly.
4 blistering ASX tech stocks
Here're four ASX tech stocks that may be on their way to forging bigger and brighter futures for shareholders.
- Netcomm Wireless Ltd (ASX: NTC)
In times gone by, Netcomm developed modems for residential use. However, Netcomm's expertise and focus has pivoted towards the rise of machine-to-machine communication (devices 'talking' to each other). It should also be a direct beneficiary of the ongoing rollout of the Government's National Broadband Network (NBN).
- XERO FPO NZ (ASX: FPO)
Xero has not yet proven to be the winning investment many investors thought it would be six, 12 or even 24 months ago. Nonetheless, the cloud computing accounting software provider is distributing a premium product to a growing marketplace locally and abroad. Aside from disrupting the services of an everyday accountant, Xero also continues to collect valuable information on its users and their businesses.
- Freelancer Ltd (ASX: FLN)
Freelancer is the world's largest crowdsourcing and freelancing network by total users and projects posted. Freelancer's offering is simple. A user posts a 'project' with a description of what they require (website, graphic design, advertising, etc.) and another user bids for the project. Freelancer clips the ticket for offering the connection.
- Technology One Limited (ASX: TNE)
Technology One is Australia's largest enterprise software provider, with offices around the world. It reinvests heavily in itself to remain relevant over time and has built a track record of doing the right thing by its shareholders. A focus on product innovation, generating sticky revenues and targeted R&D could see Technology One shares continue to outperform.
