Tech stocks have driven a rally in the US for the past few months so as an investor I am in interested in which UK tech stocks I’d buy to prepare for a long-term rally. I believe these small-cap tech stocks have bright futures that investors can profit from.
Institutional investors agree, as all three of these stocks are at least 50% owned by a mixture of active managers. This shows that professional investors are expecting these companies to rally over the coming years.
iomart Group (LSE: IOM) has two major divisions, Easyspace and Cloud Services. Easyspace provides hosting and domain services to small businesses. Meanwhile, Cloud Services targets larger companies and offers cloud computing services. Easyspace revenue has declined marginally this year, due to the nature of its clients. However, revenue in the larger Cloud Services division continues to grow organically.
It’s one of the UK tech stocks I’d buy because it has a diverse and reliable customer base and the business model ensures recurring revenue. The debt level has also declined in recent years and the business has more than enough liquidity to cover all short-term liabilities. This means that iomart should be able to weather the uncertainty of this year and continue to grow going forward.
Concurrent Technologies (LSE: CNC) manufactures essential computer hardware for various industries. The company focuses on high-end products, especially boards. Its customers are based in less cyclical sectors, like defence and aerospace. This should ensure that its revenue remains relatively consistent despite the crisis. The share price has mostly recovered from the lows, but Concurrent is a very solid business, which I believe has a bright future and is still a bargain.
It is the second UK tech stock I’d buy today because it has no long-term debt and a comparatively high level of cash. It also has relatively high margins and should continue to see long-term organic growth. The stock has also performed excellently in the past few years and should continue on this trajectory.
SDL (LSE: SDL) produces language translation tech and has four major divisions. The specifics of each division are not necessary; all you need to know is that the company has suffered little from the current crisis but the stock has still lost value. The company had no hit to revenue in the first quarter and has implemented a cost-saving plan to accommodate any second-quarter loss.
SDL is a UK tech stock I’d buy because of its low level of debt, high cash balance, and solid business model. The company has very few clients in highly damaged industries like retail and travel and, as a result, should continue to grow. The share price is still 18% down from its highs earlier in the year, making this a great opportunity to buy a bargain UK tech stock.
All three of these UK tech stocks that I’d buy should weather the current economic problems and continue to grow. I believe that they could offer great returns for brave investors.
Charles Heighton has no position in any shares mentioned. The Motley Fool UK has recommended Iomart Group. 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.