Which shares will be the best ASX 200 performers in 2019? It could be ASX technology shares.
After all, in 2018 some of the best performers were the ASX tech shares despite a large pull back of the valuations in the last few months of the year.
Over the past year the Afterpay Touch Group Ltd (ASX: APT) share price is up 90%, the Altium Limited (ASX: ALU) share price is up 65% and the Appen Ltd (ASX: APX) share price is up 54%.
Here's why the above three tech shares could be 2019's top performers:
Excellent growth
All three tech businesses are generating excellent growth. In FY18, Altium and Afterpay grew revenue by 26% and 390% respectively. Appen reported its half-year revenue increased by 106%.
This is impressive growth, particularly compared to most other ASX 200 businesses. Investors are still willing to pay for growth.
All three tech shares seemingly have several years of potential strong growth with their global earnings base and growing industries.
Improved valuations
Detractors were correct in saying that valuations went too high for tech shares at the end of the last reporting season. However, the euphoria has dampened with global economy concerns that have been created by President Trump
Since their reporting season highs the Altium share price is down by 27%, the Afterpay share price is down 44% and the Appen share price is down 18%.
Although the 'A' team of tech shares aren't cheap, their valuations now look a bit more reasonable after the heavy falls.
Limited interest rises
If interest rates were going to be extremely low forever you could justify paying extremely high prices for shares. US interest rates have risen quite a bit in the last couple of years, but the Fed has indicated that the raises may slow.
Indeed, some market commentators have suggested the December hike could be the last one if Trump gets his way.
If interest rates are going to stick at this level then the current valuations may not be silly at all considering their international growth prospects.
Foolish takeaway
If you're investing with a time horizon of five years or more in mind, then today's prices for Altium, Appen and Afterpay could be the right time to buy.
However, 2019 is probably going to be a volatile year, so paying 88x Afterpay's estimated earnings for FY20 is not exactly an obvious opportunity at the moment.
