Why I want these explosive tech shares in my portfolio

I think the tech sector is one area of the Australian share market which has plenty of quality buy and hold options.

Three which I believe are amongst the best on the market and worthy of a closer look today are listed below. Here’s why I like them:

Altium Limited (ASX: ALU)

I’m a big fan of this software-as-a-service company due to its exposure to the rapidly growing Internet of Things (IoT) market. Altium provides an award-winning printed circuit board (PCB) design software, Altium Designer, which has been growing significantly in popularity over the last few years. I expect this to continue to be the case as the IoT market grows. This is because almost all IoT devices have a PCB inside them. As they come in all shapes and sizes, I expect design software like Altium Designer to be in hot demand. This could put Altium in a position to continue growing its top line at an above-average rate for some time to come.

Appen Ltd (ASX: APX)

Another area of the technology market that is growing at a rapid pace is artificial intelligence and machine learning. As a leading provider of machine learning and artificial intelligence dataset services, I believe Appen is well positioned to deliver above-average growth for the foreseeable future. Management recently 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. One risk with Appen, though, is that it does have a number of large customers that account for a sizeable chunk of its business. Were they to go elsewhere, the company would be likely to see a reasonable drop in earnings.

Aristocrat Leisure Limited (ASX: ALL)

This gaming technology company is arguably my favourite tech share right now. While the company is best-known for its poker machines, the main attraction for me is its Digital segment. The strong performance of this segment played a key role in the company’s impressive half-year results last week. Thanks partly to a 493% increase in the number of daily active users to 8.3 million, Aristocrat Leisure posted normalised net profit after tax of $310.5 million on revenues of $1,640.9 million. This was an increase of 24.4% and 33.6%, respectively, on the prior corresponding period. I expect the recurring revenues that these daily active users generate will lead to strong top and bottom line growth from the company in the second half and beyond.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium and Appen Ltd. 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 Scott Phillips.

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