3 shares I'd buy to play the rise in cloud computing

Tech shares have outperformed recently and that trend could continue for a long time.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the commonest mistakes investors make is to believe they've missed the boat on fast-rising shares.

In fact this mistake is often the most expensive you can make, as if you exclude yourself from the best performing stocks on the basis they're 'too expensive' 'too risky' or because it's 'too late', you may miss out on some of the best long-term growth stories.

In fact my first article EVER for The Motley Fool back in May 2013 was titled "Australia's digital economy set to take off" and it considered how the rise of the internet meant a "whole new layer of infrastructure will be required to support the government-backed digital economy".

That layer of infrastructure referred to is of course cloud computing in terms of the need for data centres to store the fast-rising amounts of data businesses are producing. 

Even back in 2013 it crossed my mind as to whether it was too late to invest in the shift to cloud computing, but 6 years later cloud computing or online connectivity businesses are still some of the best-performing on the ASX and in the world. 

This shows how it's sometimes never too late to buy into some of the world's fastest growing listed businesses.

Here are three in the cloud or online connectivity space that look worth buying.

Xero Limited (ASX: XRO) is the online (cloud) accounting platform that is growing quickly in the US, UK, Australia, South Africa, and across parts of South East Asia. It has attractive economics, a market leading product, and is competing primarily with Quickbooks in a large addressable market. It may have room to run higher from today's price of $59.08.

Altium Limited (ASX: ALU) is a software business that is producing some strong organic growth thanks in part to the fact that it also has leverage to the growth of another great technological trend in the Internet of Things.

It's already very profitable and importantly is growing margins and revenues to suggests this is a strong business with a high return on equity and little debt. The valuation at $30.50 is high, but not compared to some others in the space.

Google or Alphabet Inc. is the NASDAQ listed search engine giant that also offers Google Cloud (data centre storage) for businesses and Google Drive or other products such as Google Sheets for free to individuals. On top of its growing cloud businesses it has others like Youtube, Maps and Waymo (self driving cars). The stock has fallen in price on the threat of an anti-trust investigation in the U.S. and this might be a buying opportunity. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Tom Richardson owns shares of Altium, Alphabet and Xero.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares). The Motley Fool Australia owns shares of Altium and Xero. The Motley Fool Australia has recommended Alphabet (A shares). 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.

More on Share Market News

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »