Best shares to buy now: 2 tech stocks I’d bag today

These UK tech stocks are, in my opinion, among the best shares to buy now as I see them having huge future growth opportunities.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Tech stocks are having a turbulent time as many valuations shot up during 2020. The risk of inflation now makes highly valued shares prime targets for investors to sell. But even with such risks approaching, I think many UK tech stocks are innovative and well placed to grow strongly long term. Indeed, the prospect of a sell-off may make some of these the best shares to buy now, in my view. 

Plenty of room for future growth

IT reseller Softcat (LSE: SCT) is more a tech-enabled company than a tech innovator. Nonetheless, despite not owning any technology, it’s done very well in recent years and has an entrepreneurial and focused management team.

First-half results supported the bull case for the share price. Its half-year results for the period ended 31 January were very good.

Gross profit and operating profit were up 20.4% and 41% respectively. The company also lifted its interim dividend by 18.5%, which is a significant uplift.

In its last annual report, Softcat said that it still only had market share of around 3%. The highly fragmented IT reseller market within the UK, alongside increased digital transformation, present a huge growth opportunity for Softcat.

The use of data in organisations to improve business development, the need for strong cyber security and working from home are all trends that should support financial growth at the firm. For me, this all adds up to make Softcat one of the best shares to buy now. 

Another of the best shares to buy now

GB Group (LSE: GBG) is an innovative tech group owning its own software. What it does is help banks, online retailers and companies in other industries know their customer and avoid fraud. It’s best known for identity verification.

The rise of e-commerce, as well as online banking, are two trends that I think are likely to keep boosting the shares. I see investing in the group as a way of tapping in to the increased digitalisation in our lives. GB Group also has solid fundamentals, and it’s profitable with high margins.

What are the risks?

As with any tech share, there’s a risk a competitor comes along and provides better software, which could have a massive impact. As margins are high in software, competition is intense.  

There’s also a valuation risk with GB Group. Earnings growth at the technology company has been modest, yet it trades at a price-to-earnings (P/E) ratio of around 42. However, this is broadly in line with other UK tech shares and around the same level at which the ratio has been for a while. 

Finally, GB Group could be hit by a wider tech sell-off. Fears of inflation and the strong rise in tech stock prices in 2020 both mean investors could sell out and invest their money in so-called value shares instead.

While there clearly are risks with both Softcat and GB Group, I’m focused on the opportunities. Both have huge markets, lots of customers, strong finances and are established companies. That makes them among the best stocks to buy now, in my opinion and I’ll consider adding them to my own portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Andy Ross owns no share mentioned. The Motley Fool UK has recommended Softcat. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Why I’d start buying shares with £250 today not £20,000 in future!

Is it worth waiting to start buying shares until one has more money to invest? Our writer doesn't think so…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

I’ve bought Diageo shares to boost my long-term passive income!

I plan to hold on to my Diageo shares well into retirement. Here's why I think it's a top stock…

Read more »

New virtual money concept, Gold Bitcoins
Investing Articles

Down 61%, are Argo Blockchain shares worth buying?

Argo Blockchain shares have tumbled in value. As a shareholder, Christopher Ruane considers what might come next for the business…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 UK dividend stocks with yields over 10%

These dividend stocks are the highest yielders on the UK market, says Roland Head. But how safe are these generous…

Read more »

Couple relaxing on a beach in front of a sunset
Investing Articles

I’d start buying shares for passive income with this pair

Our writer is looking to earn passive income via investing, and here are two leading stocks he might buy.

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Here’s the Shell dividend forecast through to 2024

The Shell dividend is still nearly 50% below 2019 levels. Will the oil giant use record profits to rebuild its…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

3 FTSE 100 stocks I think Warren Buffett might love!

Warren Buffett made his fortune thanks to the success of US shares. But here are three FTSE 100 stocks I…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Down 75%, has the Deliveroo share price bottomed?

The last 12 months have been torrid for the Deliveroo share price. But does this open an opportunity to grab…

Read more »