Some of the most exciting businesses for investors are ones that are at the forefront of technology in their industry. Companies that are really innovative are the ones that will most likely revolutionise their industry and grow exceptionally well.
The businesses I'm about to mention are seen as providers of some of the best products or services in Australia and around the world.
If you want to own the dominant blue-chip stocks of the future, it's best to buy them whilst they are still relatively young and growing. Like:
Xero FPO NZX (ASX: XRO)
The cloud accounting software company now has major operations in New Zealand, Australia, the UK and North America, but it still earns most of its profit from the Australia and New Zealand region. It is also developing small operations in South East Asia.
Accountants love the automation and efficiency gains that Xero provides, which is why the number of subscribers grew by 45% to 862,000 in the half year to September 2016 (1H17). This result was the biggest contributor to revenue growing by 48% to $137 million in 1H17.
Xero is still ploughing a lot of money into advertising and research, which is important for future growth but hurting current profits. Some day Xero will earn a profit and I think at that point the share price and profits won't look back.
Altium Limited (ASX: ALU)
Altium is the electronic PCB software provider with a market capitalisation of $1 billion. It has been one of the best stocks on the ASX having provided shareholders with a total return of 155.7% over the last 3 years.
Its software is cheaper than most of its competitors and more effective than most too, which is why it's slowly stealing market share. In an industry that's rapidly growing, a 1% market share increase will be large amounts of revenue in time.
Altium has a long list of customers that are among the biggest and most advanced organisations in the world such as NASA, Microsoft, Lenovo, BMW, GE, Bosch, BAE Systems and CSIRO. The products of tomorrow are going to be increasingly complex as the Internet of Things continues to grow, which will mean Altium's software could be utilised more and more.
In FY16 Altium grew revenue by 29.3%, normalised earnings per share by 43% and the dividend by 25%. It's trading at 25x FY17's estimated earnings with a partially franked dividend yield of 2.52%.
Foolish takeaway
Of the two I think Altium is positioned the best for future growth and is in the buy zone, even if it is trading expensively. For a much cheaper growth stock than Altium but paying a large dividend, you should check out our number one stock for 2017.
