These oversold ASX tech shares are ripe for the picking

Fundie admits he got it wrong last year, but this now means there are bargains galore to be snapped up. Read which stocks he picked.

| More on:
A gloved hand picks up a bright red apple, indicating ASX share prices that may be ripe for the picking

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One stock expert has admitted he got it wrong last year but said that this means that right now, there are some massive buying opportunities.

Forager Funds chief investment officer Steve Johnson said that when the COVID-19 market crash happened 13 months ago, his predictions proved to be "woeful".

"The way different sectors were impacted by COVID surprised me. A lot," he posted on the company blog.

"Home furnishings boom? Nope. Motorbike retailer has best year ever? Nope. Funeral homes have their worst year ever? Definitely didn't see that coming."

The biggest surprise was the enterprise software subsector.

Johnson, as well as many other experts, expected that this group of tech companies would be relatively shielded from COVID losses.

"Unlike software sold to individuals or small businesses, where the user simply buys the product and starts using it, most enterprise software is heavily integrated into a company's operations and customised for each client," he said.

"They are almost impossible to remove, making for sticky revenues and attractive long-term investments."

But a horrible league table of ASX-listed enterprise software makers shows their shares all currently trading significantly below their pre-pandemic prices.

"It turns out that this prediction wasn't right either," Johnson said.

"Apparently, some of the revenue isn't as recurring or reliable as investors had come to believe."

Enterprise software company Share price change
from 1 Jan 2020 to 21 Mar 2021 
Gentrack Group Ltd (ASX: GTK) (62%)
Bravura Solutions Ltd (ASX: BVS) (48%)
Integrated Research Limited (ASX: IRI) (32%)
Livetiles Ltd (ASX: LVT) (28%)
Infomedia Limited (ASX: IFM) (24%)
Iress Ltd (ASX: IRE) (24%)
Altium Limited (ASX: ALU) (21%)
Appen Ltd (ASX: APX) (20%)
ELMO Software Ltd (ASX: ELO) (19%)
Nearmap Ltd (ASX: NEA) (17%)
Readytech Holdings Ltd (ASX: RDY) (6%)
Source: Forager Funds, table created by author

Why are enterprise tech companies so cheap now?

Johnson attributed this group's misfortune to the way revenues are received from clients.

"Most enterprise software companies earn significant amounts of upfront implementation revenue. That depends on winning new clients. And some of the 'recurring' revenue is related to clients requesting changes or introducing new features," he said.

"With employees working from home and much bigger problems to deal with, most corporates have moved IT system upgrades down their lists of priorities."

But he believes this now presents a golden opportunity to buy up these companies. Because they will come roaring back.

"The problems are real, but the share price reactions look overdone," Johnson said.

"The timing of a recovery is uncertain. But the deals will return, and investor optimism will likely come back alongside them."

The executive attributed both Forager funds' outperformance in the past 12 months to "capitalising on widespread over-reactions, and being willing to change our minds as the evidence came to hand".

"In the enterprise software sector, we're doing both."

Should you invest $1,000 in Adairs Limited right now?

Before you buy Adairs Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Adairs Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Tony Yoo owns shares of Altium, Appen Ltd, Elmo Software, and Nearmap Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium and Elmo Software. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Appen Ltd, Bravura Solutions Ltd, Infomedia, Integrated Research Limited, LIVETILES FPO, Nearmap Ltd., and Readytech Holdings Ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd, Elmo Software, Infomedia, IRESS Limited, LIVETILES FPO, Nearmap Ltd., and Readytech Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Technology Shares

Man with rocket wings which have flames coming out of them.
Mergers & Acquisitions

Guess which ASX stock just rocketed 21% on takeover news

Investors are piling into the ASX stock following a confirmed takeover offer.

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Technology Shares

What does Macquarie think Xero shares are worth?

Does the broker see value in this tech stock? Let's find out.

Read more »

Man pointing at a blue rising share price graph.
Technology Shares

Up 30% in a month, this ASX 200 tech share is 'a compelling opportunity': expert

Analysts from listed investment company WAM Capital say this ASX 200 tech stock is worth watching.

Read more »

A young man goes over his finances and investment portfolio at home.
Technology Shares

How much upside does Macquarie tip for Light & Wonder shares after its result?

Let's see what the broker is saying about this tech stock.

Read more »

Business people discussing project on digital tablet.
Technology Shares

Guess which ASX 200 stock is down 4% following Q3 update

Let's see what is causing investors to hit the sell button today.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Technology Shares

Guess which ASX 200 tech stock is crashing 14% on results day

This tech stock is having a rough time today. But why?

Read more »

Data Centre Technology
Technology Shares

Is it too late to buy NextDC shares?

NextDC's share price has surged over the last couple of weeks. Will it continue?

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Technology Shares

Guess which ASX 200 tech stock is crashing 25% following an update

This tech stock is being sold off on Wednesday. But why?

Read more »