ASX 200 tech shares could be the best way to grow your wealth over the coming years.
Technology businesses are able to grow much faster than normal businesses because their product is digital. You can “replicate” the product again and again for very little cost. It’s not the same as making, shipping and storing a table, food or anything else physical.
Here are three of the best ASX 200 tech shares for your watchlist:
Altium Limited (ASX: ALU)
Altium is a leading electronic PCB software business which provides software for engineers to design the devices and vehicles of the future. There’s going to be a lot more technology in our lives in the coming years and decades. Altium will play an important part in that.
The ASX 200 tech share has been one of the best performers over the past decade. It has been steadily growing its subscriber base, its profit margins and its cash balance.
It already has an impressive client list including Space X, NASA, Tesla, Google, Amazon, John Deere and many more.
Altium is aiming for market dominance with 100,000 Altium Designer subscribers by 2025. The long-term goal is more important than what goes on in 2020. Clients tend to stick with software once they’re using it. But shorter-term profit could be hampered by the coronavirus effects.
With everything that’s going on, I’m waiting for Altium’s share price to go under $30 before buying any more.
Xero Limited (ASX: XRO)
Xero is another top ASX 200 tech share. It provides users with very useful cloud accounting software. It has a lot of automation tools that are a big timesaver.
It’s a very compelling offering which is why Xero is growing subscribers across the world. New Zealand, Australia and UK are particularly strong markets for Xero.
Xero has such high gross profit margins that every new subscriber adds a lot to the overall business position. The monthly recurring revenue is an attractive feature.
Time will tell what COVID-19 does to Xero and its SME customer base in the shorter-term, but I think Xero has a very compelling offering. Particularly as a cloud-based product that can be accessed from anywhere.
The ASX 200 tech share could eventually become one of the ASX’s biggest businesses if it can keep expanding in the US and UK.
I’d want to wait for a share price under $80 before buying Xero shares.
REA Group Limited (ASX: REA)
REA Group has a very strong market position. It owns realestate.com.au, Australia’s leading property portal. If you want to try to get the best price for your property then you’ll probably use REA Group’s services.
I like REA Group as a diversified play on the property market without having to actually own a property to profit from property.
The ASX 200 tech share is rising again as conditions for property selling return to normal in Australia. There are some potential changes coming up that could cause more property transactions. The end of jobkeeper and a change to stamp duty could cause more properties to come into the market. Higher volumes would obviously be better for REA Group.
I’m also attracted to the idea that REA Group can grow a lot into the future with its stakes in international property sites in North America and Asia. But in the current conditions I’d wait for a share price under $100.
Foolish takeaway
Each of these ASX 200 tech shares have very compelling futures. But with the COVID-19 uncertainty I think we can be picky with our buying, even with how low interest rates are at the moment. That’s why they’re on my own watchlist right now, I’m waiting for a bit of a cheaper price. But for long-term buys I think they’d still be good ideas.
Until then, I reckon there are some other great growth shares to buy like these…
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Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium and Xero. The Motley Fool Australia has recommended REA Group Limited. 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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