4 tech shares you need to know about

There are few areas of the market that attract as much interest from investors as the technology sector. In my opinion it is easy to see why this sector appeals to investors.

Those that invested in software provider Technology One Limited (ASX: TNE) 10 years ago when the share price was 66 cents would have seen the value of their shares rise by a huge 680%.

If you factor in the dividend that Technology One has paid during this time the total return increases to over 1,000%. As well as this, the estimated fully franked FY 2016 dividend of 8.3 cents means a yield on cost of 12.5% for those lucky long-term investors.

This for me shows just how a long-term investment in tech shares can produce outstanding results. But picking the right tech share is key. I’m sure for every tech success story there are a plenty of tech failures.

Luckily there are a good number of tech shares on the ASX which I believe investors should keep a close eye on. Here are four to add to your watchlist:

Afterpay Holdings Ltd (ASX: AFY)

Afterpay is a growing fintech company that provides online retailers with the option to allow their customers to buy goods now, but pay later without interest or fees. Afterpay makes its money by taking a small percentage of the sale in return for bearing its default risk. It currently counts General Pants Co, Tony Bianco, CUE, and Optus amongst its clients and has recently entered into an agreement with Neto to provide its services on its next generation e-commerce platform when it launches later this year. Neto is majority owned by Telstra Corporation Ltd (ASX: TLS) and has 2,000 merchants currently processing over $1 billion of retail transactions each year.

Appen Ltd (ASX: APX)

Appen is an exciting Australian technology company that provides language technology data and services in more than 180 languages. Its high quality data is critical for automatic speech recognition, used by some of the world’s leading technology companies and government security agencies. Management believes it is positioned for growth thanks to being a leader in high growth language technology and machine learning markets. Because the company has no debt, a robust balance sheet, and strong growth prospects, I believe Appen is a tech share to keep a close eye on.

Freelancer Ltd (ASX: FLN)

Freelancer operates the largest outsourcing marketplace in the world, helping to connect businesses of all sizes with freelance talent for a range of jobs including everything from accounting to web development. In the last quarter this growing company reported that it had reached 18 million users across 250 countries, and I would expect to see this continue to increase for the next few quarters as the company gains more exposure. I believe the growth potential ahead for the company is phenomenal. In a recent presentation management singled out just the global web design market as being an opportunity worth up to $2.7 billion per year for Freelancer. This is another tech share I believe to be a must for watch lists.

Praemium Ltd (ASX: PPS)

Another exciting fintech company that I believe investors should keep a close eye on is Praemium. It is a provider of software platforms for investment administration, separately managed accounts, and financial planning. It recently announced that its Australian separately managed account investment platform had surpassed $3 billion in funds under administration. If the rise of separately managed accounts is sustained, Praemium’s growth could prove to be explosive.

Luckily for Australian investors there are a number of great shares on the market that could offer strong returns. If you are still looking for even more investment ideas then I would suggest taking a look at these three fantastic shares.

Each pays a solid dividend and could provide share price gains in the second half of 2016. I think it's definitely worth a few minutes getting better acquainted with them.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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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