I think the Australian information technology sector is a great place to look for buy and hold investments.
This is because there are a good number of companies that I believe have the potential to grow materially over the next decade.
Three which I feel could generate outsized returns for investors over the long term are listed below. Here's why I would buy them:
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Altium Limited (ASX: ALU)
Altium is an award-winning electronic design software provider which I believe has a long runway for growth. This is thanks to its exposure to the fast-growing Internet of Things and artificial intelligence markets. These two markets are underpinning the proliferation of electronic devices globally. This is a big positive for Altium, as its software is used as an integral part of the design process by companies such as HP, Lenovo, Boeing, Philips, and BMW. Given the positive industry tailwinds, I expect demand for its software to continue increasing for a long time to come.
Appen Ltd (ASX: APX)
Another company which is benefiting from the artificial intelligence boom is Appen. This is because it has a leadership position in the development of high-quality, human-annotated training data for machine learning and artificial intelligence. As with Altium, Appen has worked closely with some very big companies. These include Apple, Facebook, and Microsoft. I believe this is a testament to the quality of its offering. Looking ahead, with spending on artificial intelligence expected to grow materially over the next decade, I believe Appen is positioned perfectly to deliver above-average profit growth over the long term.
Xero Limited (ASX: XRO)
A final tech share to look at is Xero. It is a provider of cloud-based business and accounting software which has been growing at an explosive rate over the last couple of years. This has been driven by increasing subscriber numbers and strong recurring revenue growth. Given its massive global market opportunity, high quality and sticky product, and strong pricing power, I believe it is in a great position to continue this trend for a long time to come.
