One area of the Australian share market which I think has plenty of quality buy and hold options is the tech sector.
Within this sector I think there are several companies with the potential to grow significantly over the next decade.
Three which I think are worth a closer look today are listed below:
Appen Ltd (ASX: APX)
I think that Appen could be positioned perfectly to profit from the machine learning and artificial intelligence boom. As a provider of machine learning and artificial intelligence dataset services, Appen has been experiencing significant demand for its services from some of the biggest technology companies in the world. So much so, last week the company advised that full-year underlying EBITDA is trending to the upper end of its $50 million to $55 million guidance range. If it hits the top end it will mean growth of over 95% year-on-year. I think this level of growth could justify its shares changing hands at 32x forward earnings.
Nextdc Ltd (ASX: NXT)
With more and more software and services becoming cloud-based, demand for data storage is on the rise. I think this will be great news for data centre operators such as NEXTDC. Especially given the quality of its data centres and their prime positions in key markets. One negative, however, is that NEXTDC's shares are now changing hands on a nosebleed valuation. While I expect the long-term tailwinds it is experiencing to allow it to deliver earnings growth that justifies the premium, failure to do so would almost certainly result in its share price being cut down to size. This does make it a reasonably high risk investment.
Xero Limited (ASX: XRO)
Xero is a cloud-based accounting software provider which I think could have a very bright future ahead of it. The company has been growing its share of the UK and ANZ markets at an impressive rate over the past few years. If the company can replicate this success is the massive U.S. market, then it could put it in a position to achieve above-average sales growth for the next decade. While its U.S. expansion has been a touch slower than expected due to the complexities of the market, I do believe it is worth being patient. Due to the quality of its product, I feel it is inevitable that one day Xero will win a decent share of this market.
