Top UK tech stocks to watch
Discover some of the UK tech stocks from the FTSE 100, FTSE 250 and AIM with the most attractive long-term growth prospects and short-term volatility.
Top UK tech stocks
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We’ve taken a look at some popular UK tech company stocks across different markets within the London Stock Exchange (LSE). These tech stocks are not necessarily the biggest risers or largest by capitalisation, instead they are companies that have seen volatile movements in their share price or have a strong outlook.
FTSE 100 technology stocks
Ocado Group is predominantly known for its online grocery operation. The firm doesn’t have any stores and ships the goods from its warehouses to the customer’s door. In September 2020, Ocado ended a 20-year relationship with Waitrose in favour of one with Marks & Spencer, which has bought half of the grocery business.
Ocado also has a digital grocery platform and technology that automates retail warehouses. It licenses this technology out to a number of leading supermarkets from around the world and assists them with their online, storage and distribution.
Throughout 2020, Ocado performed extremely well due to an influx in online orders caused by the Covid-19 pandemic. The firm saw its share price increase by more than 60% from March to September 2020. However, traditional supermarkets were forced to move their services online, which has seen Ocado lose some of its market share. Online sales now account for 12% of total sales in the UK, at a value of approximately £3.2 billion.
Especially as consumers return to normality after the pandemic, Ocado’s share price could see significant fluctuations. However, the recent upgrade to Ocado’s earnings guidance has provided confidence that the pandemic is causing a long-lasting demand for the company.
Halma is an acquisition-led business that buys companies, invests in them and helps them grow. This brings together often niche businesses under one umbrella to provide support and faster growth. It usually keeps existing management of any company it buys in place and gives it what it needs. This includes boosting exports from its key hubs in the US, China, Brazil, India and the EU or providing the tech it needs.
It has at least 44 companies on its books, many of them led by technology. Its portfolio is comprised of businesses providing everything from gas detection and elevator safety systems to environmental monitoring tools and medical devices.
Halma is an attractive stock for several reasons. It is a diversified company in terms of both products and geography, has delivered reliable growth and profitable. Plus, it has increased its dividend by over 5% annually for 40 consecutive years.
Halma’s revenue did fall 5% in the six months to September 2020 due to the effects of Covid-19, and its share price moved just 5.25% throughout the year. Despite this recent performance, analysts believe there is still a positive long-term outlook for Halma. Looking over a five-year period, we can see Halma’s shares have increased by almost 190%, which indicates it is a steady-growth stock.
FTSE 250 technology stocks
Games Workshop (GW) is a well-known British manufacturer or wargames and tabletop miniatures. The company is one of the FTSE 250’s best performing retailers of the past decade, with an almost 1833% rise in its share price.
A large part of this meteoric rise was thanks to its strong sales and dividend scheme, which encouraged investor confidence despite the pandemic. While others in the retail sector saw declining sales, GW issues a profit forecast of approximately £90 million for the fiscal year (ending May 2021), which was up from £59 million the previous year.
Although Games Workshop’s fanbase is small, they are dedicated and have remained so in lockdown, which has caused online sales to skyrocket.
Kainos Group provides IT, consulting and software services to businesses, governments and healthcare providers. This can involve everything from data analytics and artificial intelligence to cyber security and cloud computing. It is also the go-to consultancy for Workday software, with its Kainos Smart software automating testing to help save companies time and money.
It has 360 customers around the world. This includes big name businesses like Netflix, Diageo and AB Foods-owned Primark, and it has delivered over 70 digital transformation projects for the public sector, including for the Ministry of Justice, the Home Office and the National Health Service (NHS). For example, it designed a new system for individuals to register to vote on behalf of the UK Cabinet Office.
Since most of the company’s employees could easily work from home throughout the pandemic, Kainos has seen little impact on its day to day performance. Its revenue actually grew by 23% in its second quarter (Q2) 2020 results, thanks to strong growth in its international, commercial and healthcare sectors.
Softcat supplies IT infrastructure software centred around four areas: cyber security, IT intelligence, hybrid infrastructure and digital workspace tools. Through its work, it aims to leverage data to make systems more efficient, balance the need for on-premise datacentres and cloud computing infrastructure, and help facilitate remote working.
It has several recognisable strategic partners, including Adobe, Amazon Web Services, Dell, Citrix, Cisco and Sophos Group– demonstrating the importance of its services even for the biggest of clients.
Like Kainos, Softcat has seen a significant uptick in its performance thanks to the technology boom during the pandemic. As such, its revenues and earnings for the three-months to October 2020 were higher than the previous year. The firm revealed that growth was continuing despite the second lockdown and Brexit uncertainty plaguing the UK at the end of 2020.
AIM technology stocks
Blue Prism Group
Blue Prism Group supplies robotic process automation (RPA) software to provide businesses with what it calls a ‘digital worker’. It says it uses a combination of RPA and artificial intelligence so its digital workers can ‘execute and initiate systems-based tasks like a human’, reducing the need for labour and improving efficiency. Blue Prism sells into more than 60 countries and customers tend to start small before buying more services.
It is part of a group of UK shares that has a market capitalisation of over £1 billion – its currently valued at £1.39b.2 Over 2020, shares of Blue Prism have increased by 45.8%, although it saw its fair share of volatility caused by Covid-19.
In November 2020, it announced a strong full-year performance with an estimated 40% growth in revenues. The board also announced they had started to look at a potential second listing in the US as a result of the strong performance and future expansion plans.
IQE is a UK-based manufacturer of advanced wafer products and materials to the semiconductor industry. Semiconductors are used in practically every electrical device you can think of, but IQE makes around 80% of its revenue from products that help connect wireless devices from smartphones and tablets to satellite navigation systems and smart meters.
Unsurprisingly, that means the deployment of 5G and the increased connectivity that it will bring is vital for IQE’s future.
The company experienced a fairly turbulent 2020, with its share price falling by 69% at the onset of the global pandemic in March – down to 20p. However, as of the end of November, shares were up to 72p. IQE’s growth seems to have been factored into its share price, which is why it has experienced resistance to another rally.
It’s worth noting that IQE has experienced a lot of daily price swings, which could be of interest to short-term traders.
1 Deal three or more times in the previous month to qualify for our best commission rates.
2 As of 10 December 2020
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