Altium Limited (ASX: ALU) is a technology company that's listed on the ASX, but based in the USA.
I have owned my Altium shares for a while now and I plan to hold onto them for several more years for the following reasons:
Growth in the market
Altium is a software provider for the design of electronic printed circuit boards.
All of the items and products in our lives are becoming increasingly complex. For example, our cars, fridges, aeroplanes and computers are all more advanced than they were 10 years ago.
Altium is one of the largest providers of the Internet of Things technology to make this happen. Management predict that revenue will double to $200 million in a few years.
Strong customer base
Altium has different software offerings for different customers. It has software for one-man engineers, software for small teams of engineers and software for large groups of engineers working in big companies.
It's good to service the large companies because they are the ones most likely to subscribe for an annual service and pay recurring revenue to Altium.
Altium has an impressive list of customers including NASA, John Deere, Lenovo, BMW, Toyota, CSIRO, Bosch, Daimler, HP, Microsoft, Cochlear Limited (ASX: COH) and ResMed Inc. (CHESS) (ASX: RMD).
There's little chance of most of those organisations disappearing any time soon, so Altium has a solid source of revenue.
It would cost a huge amount of money for those entities to leave Altium and train on a competitor's product, this makes revenue fairly sticky. Altium is known for having a cheaper and better product than its competitors, which is why it's gaining market share and now has 16% of the global market.
Exposure to overseas and the US Dollar
A lot of Australians have very Australian-centric portfolios, particularly if an investor's biggest holdings are the big four banks, Telstra Corporation Ltd (ASX: TLS), Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW).
Altium provides investors with a good way to get exposure to revenue that's earned overseas and also to a strengthening US dollar, if economists' predictions come true.
Risks
Technology is a very fast-paced industry and it is quite possible a competitor or new technology could suddenly pop up.
Altium has to stay ahead of the curve and keep spending on research & development to keep growing.
Foolish takeaway
Altium is currently trading at 24x FY18's estimated earnings with an unfranked dividend yield of 2.48%.
The current valuation is a little pricey but if you hold for the long-term then Altium's growth could more than make up for today's high price. I'd rather buy Altium shares for under $8 or even $7.50 for a margin of safety.
