The new tax year is fast approaching and that means I’m looking for the best shares to buy in my Stocks and Shares ISA for 2021–22. I like to invest close to the start of the tax year to give my stocks more time to grow and compound. But this isn’t always possible as I may not find suitable shares that fit my criteria.
However, this year there are several options I would consider. A stock market correction in the US technology sector led many high-growth technology stocks to decline in recent months. Concerns of rising inflation reduced investor sentiment for big US technology shares. For long-term investors, this has created some opportunities, in my opinion.
Best shares to buy in the technology sector
One such opportunity is Nvidia (NASDAQ:NVDA). Nvidia is a leading designer of graphics processing units used in a variety of industries including gaming, data centres, artificial intelligence, and even mining for cryptocurrencies.
It’s not just a high-growth technology stock, but also a high-quality and founder-led operator. Sales and earnings are also expected to grow by double-digits over the next few years.
Nvidia’s end markets are in structurally growing sectors that could require more and more complex processing capabilities in the future. This is where Nvidia is well-placed to reap the rewards and what I think makes it one of the best shares to buy for my ISA.
Investing in high-growth technology stocks like Nvidia is not without risks, however. Sentiment towards the sector could remain weak for some time. After a strong rise in share price in the first half of 2020, shares have remained relatively flat for the past seven months.
There also don’t seem to be any significant near-term catalysts that could propel the stock in the near term. This may not be an issue for long-term investors, but shorter-term investors should be aware of this factor.
The growing communications market
I consider Twilio (NYSE: TWLO) as another one of the best shares to buy for my new ISA. Twilio is a communications platform that provides developers with a way to integrate communications and messaging functionality into existing software applications.
Many of us may have used this functionality without realising. One example, is ride-hailing taxi drivers that can communicate with passengers without revealing private phone numbers.
Twilio’s addressable market is large and growing. It’s expected to grow from $62bn in 2020 to $87bn in 2023, and Twilio has barely scratched the surface so far. I think that many businesses will increasingly want to have personalised communications with their customers in the coming years.
I continue to believe that the best shares to buy are in founder-led companies, and Twilio ticks this box. Jeff Lawson, co-founder and CEO of Twilio, has a shareholding in the company and continues to have ‘skin in the game’.
Although Twilio has significant prospects for future growth, there are some risks to be aware of. The share price gained 245% in 2020 and sentiment towards the technology sector could remain weak in the near term. As with many software companies, valuation could also be a concern. Any slowdown in growth in the short term could have an adverse reaction to its share price.
Nonetheless, as a long-term investor, I’m happy to consider an investment in this innovative, fast-growing, and cash-generative communication software business.
Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended NVIDIA. 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.