Everyone is looking for the shares that are going to give investors the best returns. It's impossible to know for certain, but it's possible to have a good guess.
You may have heard the phrase 'past performance is not an indication of future performance'. This is correct, but it doesn't rule out the possibility that a strongly performing company can carry on performing well. The best-performing child at school will likely do well in future years at college as well.
Here are two tech stocks that have grown strongly since January 2016 and I think will keep outperforming the market:
Altium Limited (ASX: ALU)
Altium is an electronic PCB software provider allowing designers to create the products of the future. The Altium share price has been on a great run since 1 January 2016 in growing by 60%. I think it could grow strongly from here because Altium is predicting it will double revenue by 2020.
The growth of the 'Internet of Things' should see demand for Altium's offering increase extensively over the next 10 years. Not only is the electronic PCB market predicted to get bigger but Altium's market share is getting bigger too, at 30 June 2015 its market share was 10% and at 31 December 2016 it was 16%.
Investing in Altium is a good way to benefit from the currency effects between the Australian dollar and U.S. dollar. It will also benefit in the medium term if Donald Trump enacts his corporate tax reduction plans.
Altium has a great list of clients, with a customer base packed full of technologically advanced organisations like NASA, Boeing, Microsoft, Lenovo, Cochlear Limited (ASX: COH) and John Deere.
Altium is trading at 27x FY17's estimated earnings with an unfranked dividend yield of 2.8%.
Class Ltd (ASX: CL1)
Class is a self-managed superannuation fund (SMSF) software provider.
The superannuation system is predicted to grow substantially over the coming years. The number of SMSFs in Australia grew to around 589,000 in December 2016. This is great for Class because SMSF processing is where most of Class' revenue comes from.
Class offers a cloud-only option for accountants and more of the industry is recognising this is the best way to go. Class had a 21.7% market share of all SMSFs at the end of 2016 and has a market-leading position of SMSFs on the cloud. The more SMSFs that transition to the cloud, the more Class will benefit.
A competitor would have to offer a substantially better and/or cheaper product to steal clients away from Class to make up for the training cost of moving to another product. Class has boasted a retention rate of over 99% over the last few years, which shows there isn't serious danger from competition yet.
Class is trading at 57x FY16's earnings with a grossed-up dividend yield of 1.93%.
Foolish takeaway
I think both of these businesses will make good long term investments and both are trading at much more attractive values than six months ago. Over time, they could both turn into good dividend stocks too, as they grow their dividends strongly. If tech stocks aren't your thing, then you should consider these great blue chips instead.
