The growth of the digital economy is one investing theme I have repeatedly covered over the past few years.
And not for nothing either.
In Australia some economists are predicting that GDP growth for the quarter ending March 31 2017 could come in negative for the second time in nine months meaning the economy could soon be heading to a technical recession defined as two straight quarters of negative growth.
With no growth, share prices will find it hard to rise. Although of course some companies in growing sectors could continue to perform well.
The digital economy's growth is still heavily outpacing the wider economy in Australia with room to run. For example only three quarters of Australians used internet-connected phones in 2015, while only around 1-in-6 had another wearable internet-connected device such as a watch. These statistics are much lower in less-developed countries, which means the global digital economy's growth will outpace that of Australia, with trends like the shift to the cloud and internet of things having many years to run.
Below I name three digitally-focused fast-growing ASX businesses, with global growth horizons.
Freelancer Ltd (ASX: FLN) is the online marketplace that connects freelance employees and employers in performing commonly digital tasks such as SEO generation, website design, graphic design, software design, data entry, HTML, online marketing and other internet-related services. Freelancer has been growing users rapidly and posted positive operating cashflow of $2.1 million for the quarter ending March 31 2017. The stock sells for 97.5 cents and this business could keep growing strongly for a long time yet.
SEEK Limited (ASX: SEK) is a globally-focused jobs website operator that operates its eponymous website in Australia and is also investing heavily in the growth of its Chinese jobs website Zhaopin. In fact SEEK's boss Andrew Bassatt recently crowed that he expects Zhaopin could deliver 15 years of "strong growth" to SEEK investors. At the heart of the growth will be the digital economy and I would not bet against SEEK delivering strong returns to investors over the decade ahead.
TPG Telecom Ltd (ASX: TPM) is probably my pick of the bunch on current valuations given its shares change hands for just $5.95 this afternoon as the market continues to fret over the margin-crunching impact of the NBN on its business model. TPG has several growth levers to pull ahead of it however and its iiNet home broadband internet-services business is still lifting margins, with its fibre-to-the-basement business also offering the potential to boost profit margins. TPG also recently effectively entered the Singapore and Australia 5G mobile markets and I would not bet against this business crushing the market's returns over the next five years.
