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3 stellar tech shares I would buy and hold for a decade

Abstract digital and technology background.

The Australian tech sector may not be the biggest, but it isn’t short of quality shares with strong long-term growth potential.

Three of my favourites are listed below. Here’s why I think they deserve a spot in your portfolio:

Altium Limited (ASX: ALU)

I think that Altium is a great way for investors to gain exposure to the fast-growing Internet of Things (IoT) market. The company’s popular software, Altium Designer, allows users to design the printed circuit boards (PCB) that are found in the majority of IoT devices. Demand has been so strong that Altium recently reported a first-half profit of US$14.9 million on revenue of U$63.3 million. This was an increase of 50.8% and 30%, respectively, on the prior corresponding period. Management is aiming to reach US$200 million in annual revenue by FY 2020 and I wouldn’t be surprised if it got there sooner based on this latest result.

Appen Ltd (ASX: APX)

Another top tech share that has been performing ahead of expectations is Appen. It operates in the lucrative machine learning and artificial intelligence market by providing dataset services. Thanks to strong demand in the social and search categories from some of the world’s biggest tech giants, Appen recently advised that its full-year EBITDA is trending towards the upper end of its $50 million to $55 million guidance range. If it does hit the top end, it will result in EBITDA growth of 95% year-on-year. I think this level of growth would justify its shares changing hands at 32x estimated forward earnings today.

ELMO Software Ltd (ASX: ELO)

At the small end of the market it is hard to look past this up and coming tech star which provides integrated cloud-based human resources and payroll software solutions. The cashed-up tech company’s shares have been on an impressive run over the last 12 months thanks to increasing demand for its software. In fact, the demand has been so strong that this year the company is on track to achieve EBITDA of $5.7 million. This will be an increase of almost 370% on FY 2017’s result and over double its prospectus forecast.

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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 and has recommended ELMOSFTWRE FPO. 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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