3 technology shares for your watchlist

The technology industry is one of the best sectors in my opinion. It’s full of companies trying to make something better, faster or more efficient than it was before.

Tech businesses have proven to be good investments for shareholders because of how capital-light they are. It’s much cheaper to develop some software and distribute it over the internet compared to building a factory with a production line or owning a large physical distribution network.

That’s why I think the following shares are worth considering for your portfolio:

Citadel Group Ltd (ASX: CGL)

Citadel is a software company that assists government, health, education, defence and security management make decisions with secure enterprise information.

Software is becoming increasingly important for people in all sectors to work faster, smarter and come to the best outcome. This is why Citadel’s software is so useful for its customers.

Citadel is trading at 24x FY18’s estimated earnings with a grossed-up dividend yield of 2.8%.

Appen Ltd (ASX: APX)

Appen provides high-quality data for machine learning. It works with some of the biggest tech, automotive and eCommerce companies, as well as governments, to create their products and services.

AI (and therefore machine learning) is only going to become more prevalent as time goes on, so Appen’s offering is quite essential for those businesses.

It’s currently trading at 42x FY18’s estimated earnings.


A more diversified way to invest into the technology sector is this exchanged-traded fund (ETF) which gives access to some of the biggest and best technology businesses that are listed in the US.

Its top holdings include Apple, Facebook, Alphabet (Google), Amazon and Microsoft. I’d much rather own this group of companies over a group of Australia’s largest blue chips over the long-term.

Foolish takeaway

All three shares have done very well over the past few years and could continue to do so. Appen is trading a bit too expensively for me to contemplate a buy, but both the NASDAQ and particularly Citadel look good value at this level.

Want to know where the next big tech boom is coming from? You should read this.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of Appen Ltd and Citadel Group 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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