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

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. 

These ASX shares have shot up 204% and even 954%, but we think they’re just getting started

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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.

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