3 hot tech shares for the millionaires of tomorrow

With the more defensive sectors of the economy growing at a measly handful of percent per annum, investors with an eye for the future are increasingly turning to the ASX’s nascent, but growing, tech sector.

While some may have noted the launch of Betashares new Cybersecurity ETF – which coincidentally goes by the name of HACK – there are plenty of other opportunities for investors looking for the next big thing. Here are three of my favourites:

XERO FPO NZX (ASX: XRO) is a cloud accounting software developer. Already a market leader in the ANZ region, Xero’s upside potential comes from its expansion into the US, UK, and other regions like Singapore. While this is a slow burn due to the necessity of writing new software to cater to accounting legislation in each of these jurisdictions, Xero’s upside is impressive. Although as yet unprofitable, it has great margins, is investing heavily for growth and boasts strong customer retention. Competition from the likes of Myob Group Ltd (ASX: MYO) and US-based Intuit is stiff, but Xero has shown it’s got what it takes to claim market share from these incumbents.

WiseTech Global Ltd (ASX: WTC) is a software provider to the logistics services industry globally. It made its debut on the ASX not too long ago, and catapulted to superstardom on the back of its very high customer retention rate and a couple of acquisitions. Management aren’t resting on their laurels either, and WiseTech invested approximately one third of its profits in Research & Development (R&D) over the past year – this will help drive growth and fend off competition in the future. Shares trade on a lofty multiple, but the company is well funded, has gross profit margins of 85% (!), and with the full benefits yet to flow through from recent acquisitions, WiseTech appears suitable for a small position in investors’ portfolios.

Nearmap Ltd (ASX: NEA) is a profitable provider of aerial imagery in Australia and the USA. Its imagery is of higher quality than that provided by the likes of Google Earth, and this combined with its analytics allows companies like insurers and solar panel installers to be more productive and save costs on making actual site visits. Shares have been volatile recently due to heavy investment in the US market that has been slow to bear fruit, but recent business wins suggest the tide could be turning. Like Xero and WiseTech above, Nearmap also possesses a scalable platform that allows a greater percentage of new revenue to fall straight through to the bottom line.

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Motley Fool contributor Sean O'Neill owns shares of Nearmap Ltd. and Xero. The Motley Fool Australia owns shares of WiseTech Global and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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