Technology shares are some of the most exciting on the ASX, I think they could be good candidates to beat the market.
Some tech businesses may look expensive but they have higher gross profit margins than an average business which means new revenue will help grow profit at a faster rate.
These are three of my tech ideas:
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is a donation payment business that enables people like church-goers to electronically donate to their chosen organisation. It also provides a donor management system which includes donor tools, finance tools and a custom community app. It's a good ecosystem.
The company generates attractive regular annual revenue from the people donating and it is steadily increasing its US market share by winning new medium and large churches. A bonus is that it could win more clients in the non-profit organisations and education providers – the focus has just been the faith sector.
In its recent September 2019 result it grew revenue by 30% to US$57.4 million and net profit growth of 247% to US$6.5 million. There could be some impressive growth over the next year or two as it rapidly increases its net profit margin.
Redbubble Ltd (ASX: RBL)
Redbubble is a global online marketplace that sells various artist-produced works like wall art, t-shirts and so on.
It's the type of business that can benefit from various network effects. The more it becomes known as a marketplace leader of artist products the more buyers and sellers it will attract. The marketplace model also means the digital infrastructure is already there, all new revenue should mostly fall to the next profit line.
Redbubble recently released the first quarter result of FY20 which showed marketplace revenue growth of 43% to $70 million, gross profit growth of 48% to $27 million, an increase of the gross profit margin up 1.5% to 37.9% and free cash flow improving to $7.8 million – an improvement from $0.4 million from the prior corresponding period.
BetaShares NASDAQ 100 ETF (ASX: NDQ)
The ASX has plenty of smaller tech shares, but it doesn't have any big blue chip tech shares in it yet. This ETF looks to give investors exposure of the 100 biggest businesses on the NASDAQ, which is a tech-heavy index in the US.
The ETF gives concentrated exposure to the big US tech giants like Microsoft, Amazon, Apple, Alphabet (Google) and Facebook. As a group they are under a bit of political pressure at the moment, but they have various business divisions which have exciting long-term futures including cloud computing, AI, virtual reality and so on.
Foolish takeaway
Each of these shares have exciting futures. Redbubble and Pushpay probably have the better chance of producing bigger returns over the next couple of years as their profit rises quickly. Pushpay would be preferred option because of its more defensive earnings.
