US technology shares have been soaring this year, and have outperformed UK shares by some margin. The technology-filled Nasdaq composite index is up by over 30%. After such strength, a stock market correction could provide a decent entry point, in my opinion.
The work-from-home trend of 2020 has increased demand for all kinds of software and hardware. The beneficiaries aren’t just in the US – the UK market has some great quality computing companies too.
Technology focused UK shares
One of these UK shares that I’m buying in September is Computacenter (LSE: CCC). This IT infrastructure services company advises organisations on IT strategy and manages customer infrastructure. Due to Covid-19-related country-wide shutdowns, I reckon IT services are set to be performing pretty well this year.
On Wednesday, Computacenter said it expects results for 2020 to be “materially above” its previous expectations. The FTSE 250 company said its upbeat outlook is as a result of good performance in the first half of the year continuing into the first two months of the second half. Further details will be provided in its next set of results, due on 9 September.
This all sounds very positive to me, and it’s not the first upbeat assessment this year either. In July, Computacenter reported a “very pleasing first half result”. The company highlighted a surge in demand for IT equipment from those setting up home offices during the lockdown.
Aside from the positive management comments, these UK shares look fundamentally sound to me. The company has consistently increased its revenue and profit. It has a return on capital of over 22%, net cash on its balance sheet, and even provides a dividend yielding over 2% per year.
A top-notch competitor
I also like Softcat (LSE: SCT), another IT infrastructure services company. I would say that Softcat, like Computacenter, is a high-quality, growing, and well-managed IT company.
There is strong competition in the sector, but Softcat has taken market share over the years. With growing revenues and operating margin, these UK shares look well-placed for further gains.
Like Computacenter, Softcat recently reported profit ahead of expectations. It highlighted strong cash generation and announced its intention to resume its normal dividend policy. Both companies seem to be in a good place and management for both have provided positive outlooks.
Softcat has a return on capital of nearly 90%, and even pays a dividend, yielding over 2%. It looks well financed to me, with net cash on its balance sheet. There is still room for growth with many companies still migrating to cloud-based services.
With Softcat’s ability to gain market share in this fragmented industry, and its strong momentum of positive updates, I’m happy to add these UK shares in my portfolio. Holding the best UK shares from the technology sector could be a prudent way to ride the technology boom and make the most of any short-term stock market correction, in my opinion.
Harshil Patel has no position in any of the shares 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.