Aussie stocks to invest in to profit from the Information Age

Tailwinds, barriers to entry, high margins and dividends; what more could a long-term investor ask for?

If you’re a set-and-forget type of investor, there’s likely a few characteristics you look for in the stocks you buy.

Chances are organic growth from long-term tailwinds is one.

Wide and sustainable profit margins are also a must.           

So too are barriers to entry – making it difficult for new competitors to emerge.

And, of course, who could forget dividends – preferably fully-franked. 

Unfortunately, one the hardest things for local investors or analysts to do is find all the above characteristics in a company that also trades at a reasonable price.

However, in the local telecommunications sector, many companies do indeed tick all the above characteristics.

Adding them to your watchlist and waiting for the right moment to pounce, seems a prudent investment strategy.

Is the Information Age a big deal?

One valid concern many long-term investors have with the intertwining of the telecommunications and technology sectors is its rapid pace of change.

Indeed, the internet landscape is evolving fast. Long gone are the days of a modem interrupting a home phone service.

According to data analytics business, Domo, on the internet every minute of every day: 

  • Facebook users share 2,460,000 pieces of content
  • Amazon makes $83,000 in online sales
  • Apple users download 48,000 apps, and;
  • Google processes 4,000,000 search queries

Of course, these are just some of the mind-boggling statistics occurring on the internet.

Local opportunities

Now, you might be thinking all the best investment opportunities lay offshore (for example, Facebook, Google and Apple). However, Australian investors can quite easily get exposure to some exciting communication and technology stocks right here on the ASX.

Figure 01. Telstra’s mobile subscribers, total annual SMS numbers, and voice minutes have grown rapidly

Source: Telstra Half-Year KPI Summary

As the above chart shows, mobile activity on the Telstra Corporation (ASX: TLS) network continues to grow at a rapid clip.

While some analysts have begun to question whether Australian telecommunications companies have embraced the next wave of the Information Age; Telstra – and rivals such as TPG Telecom Ltd (ASX: TPM) – have begun to invest heavily in new growth areas.

Big Data, cloud computing, and machine to machine (M2M) communication are growing exceptionally fast. Both Telstra and TPG are rolling out new networks and data centres to meet the expected surge in data usage.

M2M is a particularly exciting trend emerging from the Information Age. That is, the ability of devices to ‘speak’ to each other could present huge opportunities for the right company. Telstra has already witnessed its number of M2M services soar in recent years.

Figure 02. Telstra’s machine to machine (M2M) offering is taking off

Source: Telstra Half-Year KPI Summary

Smaller ASX-listed businesses in the exciting M2M space include circuit board developer, Altium Limited (ASX: ALU) and small-cap, Netcomm Wireless Ltd (ASX: NTC)

Enterprise technology services business, Technology One Limited (ASX: TNE), is also worth watching given its indirect exposure to rising data usage by big business.

When considering an entry into an exciting technology business like those above, as always, make sure you do your research, expect volatility, and wait for an appropriate share price before hitting the buy button.