Technology stocks are some of the best ones to own on the ASX and indeed on other stock exchanges too.
Using the power of the internet and computing can make it incredibly cheap and easy to grow a business. Software or technology can be easily distributed to many more customers, the only limitations are networks, server power, and research & development.
Here are three technology stocks that I think should be in every portfolio:
REA Group Limited (ASX: REA)
REA Group is the owner of Realestate.com.au and has significant stakes in other property websites in the USA and Asia.
As long as REA Group's websites can handle the increasing traffic then long-term growth should fall in to place. Property owners and prospective buyers know how important digital advertising is, which is why they go to the biggest Australian website first.
REA Group is currently trading at 37x FY17's estimated earnings with a grossed-up dividend yield of 1.84%.
Altium Limited (ASX: ALU)
Altium is the owner of electronic PCB design software. It helps organisations like NASA, John Deere, Microsoft, Lenovo, Cochlear Limited (ASX: COH) and BMW design the items and products of tomorrow.
Once Altium's software is developed it is easy to distribute it to the customer. Altium should receive a lot of growth over the next several years as the 'Internet of Things' continues to grow. Altium has large potential, but it must keep investing in research & development.
Altium is currently trading at 33x FY17's estimated earnings with an unfranked dividend yield of 2.29%.
Class Ltd (ASX: CL1)
Class is the software provider for self-managed superannuation fund (SMSF) administrators. Superannuation is a booming industry, SMSFs are the perfect focus of Class' technology due to the amount of regulations that must be followed.
Class helps administrators cut the amount of time taken to complete the necessary administrative work. That's a big reason why Class has achieved a retention rate of 99% over the last few years.
It's trading at 59x FY16's earnings with a grossed-up dividend yield of 1.87%.
Foolish takeaway
I think all three of the above stocks are some of the best businesses on the ASX. The problem is that they are all trading quite expensively at the moment, I'd want to try to buy them 10% to 25% cheaper than they are now. However, if I had to pick one at the current prices then I would probably go for Altium.
