Special Free Report From The Motley Fool
Our top stock for 2016 may not be a household name, but its software is fundamental to the design and manufacture of a myriad of electronic devices. Everything from a Cochlear, (ASX:COH) bionic ear, to a HP computer and even the electronic systems in a BMW. It’s a highly specialised area, and thanks to the increasing proliferation of electronic devices and componentry, one that is growing fast. It’s our firm belief that shareholders in Altium (ASX: ALU) are likely to be rewarded over time. Simply read on for all the details on Altium, our top pick for 2016!
Altium (ASX: ALU)
- Company snapshot (data as of 6 October, 2015)
- Market cap: $602 million
- Recent share price: $4.76
- Cash/debt: $81 million / $0.14 million
- P/E: 38.2
- Steady growth combined with new product launches
- Rock-solid balance sheet and strong pricing power
- Global diversification and high levels of recurring revenue
What Altium does
Altium has a flexible and expanding (more on that in a second) suite of software which allows engineers to design Printed Circuit Boards (PCBs) — the intricate tangle of wire and plastic that form the heart of modern day electronic components.
Altium’s software is used by everyone from NASA to a nutty hobbyist, helping to design everything from a bionic ear, to a bird feeder. It’s a highly specialised area, and thanks to the increasing proliferation of smart connected devices, one that is growing fast.
Altium has grown revenues at an annualised rate of 12% per year for the past 5 years, and we expect it to continue growing for many years to come.
A huge 93% of Altium’s total revenue is generated outside of Australia. This is incredibly attractive from a portfolio perspective when we consider some of the headwinds that the broader Australian economy is facing.
The global diversification makes for a reliable income stream and close to half the money rolling in Altium’s front door comes from subscription revenue. Even if new customer growth slows, the company can still bank on a large share of its revenue being sustained.
CEO Aram Mirkazemi may have only held the top job for a little under two years, but he has a long and successful association with the company.
Mirkazemi’s key strengths are his technical prowess and depth of industry experience. Both of these make him well suited to the CEO role for a fast-growing tech company such as Altium.
Risks and when to sell
A subscription model does provide a good deal of certainty for Altium, but the other half of revenues that come from one-time license sales would suffer in any global economic slump. Potential clients are likely to just make do with existing systems in tough times — a phenomenon Altium learnt first-hand during the GFC, and made worse thanks to some ill-considered pricing decisions by the then management team.
One of Altium’s strengths – operating leverage – can also become a weakness. If there was another global slowdown that leverage would work in reverse: a modest fall in revenue would mean a much larger decline in operating profits.
Technology can change quickly and there are other well-heeled and experienced operators in this space that are just as determined to gain market share. A serious misstep with a new product release could motivate customers to look elsewhere for their PCB design needs.
The Foolish bottom line
Altium ticks a lot of boxes for us at The Motley Fool. The company’s growth prospects, global diversification, and durable core business all make it an attractive foundation stone for our portfolio.
An important announcement from The Motley Fool Australia (including my $100,000 commitment to dividend stocks!)
It starts with this: Andrew Page has recently written an exclusive report on 3 small cap ASX stocks that could be even better bets than G8 Education.
I frankly doubt these are the sorts of ideas you’ll find tipped off in many other places. That’s because these aren’t some big-name headline darlings….
Instead, these are fast growing businesses that look poised to bring investors like you and I what could be double-digit total returns—for what could be decades to come.
How can I be so confident?
Simple: the first pick in Andrew’s report is trading on a franked dividend yield of around 10%. The second pick has a balance sheet chock full of cash, and no debt. An asset light business model allows the company to pay a very high percentage of its growing profits to shareholders in the form of dividends. The third company trades on a fully franked dividend yield of over 4.5% (over 6.5% gross), plus regularly pays special dividends.
Not bad for a small-cap growth stock!
Andrew has titled this report, “3 Overlooked Small-Cap Shares with Big Dividend Yields.”
By claiming your copy now, you’ll receive the names, ticker codes and a full investment analysis for these very promising small cap dividend stocks.
You’ll also get the exclusive chance to “test drive” our newest Motley Fool investment service taking no risk whatsoever.
If, like me, you particularly love dividend-paying stocks, let me urge you to take a look now…
Introducing… Motley Fool Dividend Investor!
Motley Fool Dividend Investor is our newest Motley Fool investment service, one that’s focused exclusively on dividend-paying ASX stocks.
I’d like for you to give it go. Here’s why…
Now, I don’t mean to brag, but here at the Motley Fool Australia… We’re pretty good at picking ASX winners.
That explains the eye-popping returns from recommendations in our flagship Motley Fool Share Advisor service, like these…
- Retail Food Group (ASX: RFG)… up 148%
- Corporate Travel Management (ASX: CTD)… up 455%
- And even US-listed Netflix (Nasdaq: NFLX)… up a whopping 945%
These recommendations—and dozens more— have helped unlock hundreds of millions of dollars of market capitalisation appreciation for tens of thousands of everyday Australian investors.
But here’s the rub. After years of hearing from Australian investors just like you, we realized many people would prefer to hear exclusively about our very best DIVIDEND ideas…
The ASX companies we believe are best positioned to boost your portfolio income, all while positioning yourself for significant capital appreciation into the bargain.
(That’s before we get into the tax benefits!)
And who can blame them? Not me. With interest rates at historic lows, and term deposits offering meagre returns at best, the timing simply couldn’t be better.
In fact, I’m so convinced I’ve even elected to put $100,000 of my own family’s money into our Motley Fool Dividend Investor picks…
So you can see how convinced I am of the income AND returns potential of our brand-new service.
When you join me today, I’ll send you a FREE copy of my brand-new report, “3 Overlooked Small-Cap Shares with Big Dividend Yields” to Own TODAY”.
And you’ll also receive:
- Exclusive access to our members-only website, where you’ll find our “Buy First” stocks and every other Motley Fool Dividend Investor stock pick we’ll ever recommend.
- As well as one brand-new ASX pick every single month. Make no mistake: Your membership to Motley Fool Dividend Investor will clue you in to some of the most promising under-the-radar dividend investments on the ASX today. (These are the sort companies you simply WON’T likely find on the front page of any business journals!)
- Not to mention breaking alerts by email with important market news that impacts your portfolio, including weekly updates on our picks…
- Plus, 24/7 access to our exclusive member-only online discussion boards – where you can talk ASX stocks with your fellow investors any time, night or day… and have your investing questions answered by our Motley Fool Dividend Investor team.
From resources to retail to technology companies and back again, Motley Fool Dividend Investor will leave no stone unturned in the search for dividend mega-winners.
And if history is anything to judge by, we could be in store for some simply massive winners!
And did I mention the low price and RISK-FREE trial?
If you act right now, you can lock in a one year of membership to Motley Fool Dividend Investor for just $99…
That’s a whopping 55% OFF our retail price. Click here now to secure your subscription at this low, low price.
Meanwhile, you can rest assured you’re 100% protected by our 30-day, no questions asked, money-back guarantee of your subscription fee.
That’s right. You’re entitled to take a FULL 30 DAYS to have a good look at everything Motley Fool Dividend Investor has to offer.
And if you decide you’d like to opt out at any point after your first month, you’ll be entitled to the full dollar value of the remainder of your membership term.
But there is one catch… you must use the links in this report now. This offer simply isn’t available to the general public.
Simply click here or the link below to get started right now and get full access to all our best dividend-paying ASX ideas today.
General Manager, Motley Fool Australia
P.S. Remember, this is a unique win-win proposition because you’re covered by our special “keep everything and risk nothing” DOUBLE GUARANTEE. Simply click here to get started.
P.P.S. All of my colleagues thought I was crazy to offer these bonuses even if people don’t join us for the long haul. But I’m confident once you see the difference Motley Fool Dividend Investor can make, you won’t know how you invested without it.
Last updated: 6 October 2015
This report was prepared by Scott Phillips and Catherine Baab-Muguira, and authorised by Bruce Jackson. This report contains general investment advice only (under AFSL 400691). Please refer to our Financial Services Guide (FSG) for more information. Employees and contractors of The Motley Fool, may have an interest in any shares mentioned in this free report. These interests can change at any time. The Motley Fool has a clear and concise disclosure policy.
Any and all advice contained in the above content is general advice that has not taken into account your personal circumstances. Before you act on the general advice we provide, please consider whether it is appropriate for your personal or individual circumstances. Please refer to our Financial Services Guide for more information or email us at member[email protected] to request a copy.
Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns.
All returns cited are hypothetical and based on the percentage change between the stock price at the time of recommendation and the current or sell price (if the position has been closed) at the time of publication. Brokerage, taxes and any other associated costs are not taken into account. Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. Performance figures are not intended to be a forecast and The Motley Fool does not guarantee the performance of, or returns on any investment. Any money back guarantee is strictly limited to the subscription price paid for the product. All figures are accurate as of 6 October 2015. Any and all advice contained in the above content is general advice that has not taken into account your personal circumstances.