2020 has been a year that has brought its fair share of ups and downs, challenges and (for some) rewards on the ASX share market. With the onset of the coronavirus pandemic early in the year, investors had to rapidly adjust to a post-COVID world through their investing.
Some sectors were smashed by the pandemic, while others flourished. One of the sectors that has famously been perhaps the biggest beneficiary of 2020 has been technology – and ASX tech shares in particular.
So let’s have a look at which ASX tech shares have been the best performers of the year so far. Here are the 10 top performers:
|ASX Tech Share||YTD share price gain (as of 11 December||Market Capitalisation|
|Afterpay Ltd (ASX: APT)||229.77%||$28.77 billion|
|Pushpay Holdings Ltd (ASX: PPH)||84.54%||$2.03 billion|
|Nextdc Ltd (ASX: NXT)||81.47%||$5.41 billion|
|Xero Limited (ASX: XRO)||77.22%||$20.73 billion|
|Dicker Data Ltd (ASX: DDR)||55.33%||$1.81 billion|
|WiseTech Global Ltd (ASX: WTC)||29.9%||$9.85 billion|
|Megaport Ltd (ASX: MP1)||29.11%||$2.08 billion|
|Appen Ltd (ASX: APX)||14.7%||$3.11 billion|
|Altium Limited (ASX: ALU)||5.3%||$4.74 billion|
|TechnologyOne Ltd (ASX: TNE)||0.97%||$2.67 billion|
As you can see, all of these tech shares have had phenomenal years (although some clearly more than others). As a reference point, the broad-market S&P/ASX 200 Index (ASX: XJO) has returned -0.7% for the year so far, not exactly a high bar to clear.
ASX tech shares and payments
So, although all of these companies are ‘tech shares’ in a broad sense, we do see some common themes here. For one, payments is clearly an area of immense growth. The top 2 stocks in terms of year-to-date returns are both payments companies in Afterpay and Pushpay.
The pandemic has been a clear catalyst for the rise of these kinds of companies, as Australians and people around the world shunned physical cash out of hygiene concerns. Pushpay, which provides a payments platform for religious organisations and charities, and Afterpay, a payments company that facilitates buy now, pay later (BNPL) transactions, have been happy to take up the slack. But the pandemic has, of course, merely accelerated a trend that has been growing for years.
It’s not just the pandemic bolstering these companies’ share prices though. Afterpay, in particular, has had a few very positive developments this year. It welcomed Chinese e-commerce giant Tencent Holdings Ltd (HKG: 0700) as a major shareholder in April. It has also managed to successfully stare down calls for further regulation in the BNPL space so far.
Software-as-a-Service (SaaS) shares
We’ve also seen companies in the software-as-a-service space perform exceedingly well this year so far. These include online accounting company Xero, as well as logistics solutions purveyor WiseTech Global, human dataset company Appen, and electrical engineering software company Altium. These companies are all members of the WAAAX club incidentally (along with Afterpay). We can also throw enterprise software company TechnologyOne into this mix
Investors have flocked to the kind of compounded earnings growth these companies can (and have) delivered in 2020, in the face of the pandemic no less. Take top performer Xero for instance. Last month, it managed to report revenue growth of 21%, earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 86% and a 19% increase in subscribers for the 6 months ending 30 September.
Data services shares
Finally, we see data services providers like Megaport and Dicker Data performing strongly this year as well. These companies provide data centres and other ‘behind the scenes’ digital infrastructure that enable companies to offer cloud-based services, better in-house digital connectivity and other digital platforms.
As ‘the cloud’ and other cutting-edge digital services grow in popularity and scale, these are the kinds of companies that stand to benefit from the hardware required to enable such growth. You can think of them as the ‘pickaxe, pan and shovel’ sellers in the proverbial gold rush.
As you can see, 2020 has been a year of phenomenal gains for many of the ASX’s most well-known tech shares. The pandemic has offered many companies a unique advantage to innovate and disrupt, with many seizing the opportunity with relish. It’s a great reminder that some of the best investing is done with an eye on the horizon.
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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium and MEGAPORT FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Appen Ltd, PUSHPAY FPO NZX, and Xero. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and WiseTech Global. The Motley Fool Australia has recommended MEGAPORT FPO and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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