With the Australian information technology sector leading markets in August with 15% returns, who are some of Australian tech darlings?
The ASX 200 information technology sector returned 15% during August, making it the top-performing sector, and had returned 36% since the start of the year despite a market downturn.
Although it only makes up 4% of the index, several constituents had seen strong performance while two had seen performance of more than 100% over the past year.
Afterpay
This buy now, pay later was the best-performing ASX 200 tech stock with returns of 212% since the start of 2020 and of 195% over one year to 31 August.
There were eight funds holding the buy now, pay later provider including four from Ausbil. The funds were Aberdeen Standard Australian Equities, Ausbil Active Sustainable Equity, Australian Active Equity, Australian Concentrated Equity and Australian Emerging Leaders, VanEck Australian Equal Weight ETF and VanEck Vectors S&P/ASX MidCap ETF and Antares Ex-20 Australian Equities.
“Its attractive business model with high returns on equity and capital velocity, coupled with its first mover advantage, should drive robust revenue growth. While we had been wary about how it would perform in a recession, it has been resilient amid the pandemic which reflects the product flexibility that is inherent to its business,” Aberdeen Standard Investments said.
NextDC
In second place was data centre operator NextDC which returned 85% since the start of the year and 103% over one year. This was the most widely-held of the four stocks with funds holding this stock including Ironbark Karara Australian Small Companies, OC Premium Small Companies, Platypus Australian Equities Trust and SGH 20, which had a 6% weighting to the stock.
In its most recent update, OC said the appeal of NextDC, which it holds in its top five largest stocks in the Premium Small Companies fund, was that it would be a beneficiary of structural trends in a COVID-19 impacted world.
“We are looking for resilient and innovative structural winners, who can control their own destiny and who can continue exploiting their competitive advantage, taking share from lower-tech incumbents, and growing independently of the economic cycle. Portfolio holdings such as NextDC currently fit this profile,” it said.
Appen
Appen is one of the older companies in the list, having been founded in Sydney back in 1996. It provides data for the development of machine learning and artificial intelligence programmes and has returned 54% since the start of the year and 34% over one year. It was held by 10 Australian equity funds including Pendal Smaller Companies, BlackRock iShares S&P ASX Small Ordinaries ETF, SSgA SPDR S&P ASX Small Ordinaries. The OC Dynamic Equity and OC Premium Small Companies both held over 6% in the stock.
Xero
Lastly, New Zealand firm Xero, which produces online accounting software, has returned 26% since the start of the year and 59% over one year. Founded in 2006, the stock was held by funds such as Pendal MidCap, Fidelity Future Leaders and Australian Ethical Advocacy while the Hyperion Australian Growth Companies and Small Growth Companies funds both held more than 8% to the stock.
