If you’re looking to make a play for the long-term tailwinds of the technology sector, Telstra Corporation Ltd (ASX: TLS) shares should be at the top of your watchlist, in my opinion.
It’s got huge amounts of cash to burn on new investments, produces excellent cash flow (despite reinvesting heavily) and pays an excellent dividend.
And while it is relinquishing ownership of Australia’s lucrative copper cable network, it’s moving into other more exciting areas of communications such as eHealth, networked application services and further afield, into Asia.
Unfortunately, these growing business units make up very little of the enormous company that is Telstra and, therefore, are unlikely to ‘move the dial’ for investors any time soon.
However, at the other end of the ASX’s spectrum, we have a number of small-cap companies looking to carve out their own niche in growth markets.
The $156 million Senetas Corporation Limited (ASX: SEN) builds encryption devices which run on fibre optic and copper cable networks. The devices have received the highest levels of certification, and the company is already profitable, has a good cash balance and is well managed.
Moreover, having fallen back to just 14.5 cents per share following its recent spike to 22 cents, it’s again looking like a worthy investment over the long-term.
Prophecy International Holdings Limited (ASX: PRO) is another small-cap technology business that is already profitable. Shares of the analysis and security business have recently come back from a high of $1.95 to a more compelling range for long-term investors.
Finally, at the most speculative end of the ASX technology sector we have Reffind Ltd (ASX: RFN). I recently picked Reffind as my top stock for September knowing full-well how speculative the business is at these levels.
Indeed, despite outperforming Telstra’s share price by 60% in the last month (and climbing 280% since listing in July), the company is currently worth just $47 million and is not yet profitable.
Reffind has developed a mobile app that enables companies to send job referrals to their employees at a very low cost. Employees can then send the job ‘card’ to a friend for points or submit their own job application. It also has mobile applications to engage and educate employees.
Lead by a very experienced human resources and technology-focused management team, Reffind is hoping to become profitable in the next year.
The risks are large; I’ll admit, but I think there is plenty of money to be made investing small technology and healthcare companies on the ASX. That’s why I’ve bought two of the above three companies for my share portfolio.
Where to invest $1,000 right now
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Motley Fool contributor Owen Raskiewicz owns shares of Senetas. Ltd and Reffind.
Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. 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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