I think that the ASX tech shares in this article could be a buy in January 2021.
Good technology businesses have a lot of operating advantages compared to non-tech businesses. Some of the best ones have a high gross profit margin and long-term customers/clients.
These are some of the ones I’d be happy to buy for my portfolio:
VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)
Some exchange-traded funds (ETFs) are aimed at giving investors exposure to a particular industry or theme. As you may be able to guess, this one is about the video gaming and eSports sector.
2020 saw large numbers of people locked down in their homes and plenty of them turned to video games for entertainment because of the COVID-19 pandemic lockdowns.
The video gaming industry has been growing for many years. COVID-19 seems to have accelerated that trend and demand. You may have read that the new Playstation 5 is hard to get a hold of in some places.
VanEck is the provider of this ETF and it tries to track the performance, after fees, of the MVIS Global Video Gaming and eSports Index which comprises companies involved in video game development, eSports, and related hardware and software globally.
Its annual management fee is 0.55% per annum. Over the past five years the index has returned an average of 36.2% per annum. Over the past year the index has grown 68.75%.
At 5 January 2021, the VanEck Vectors Video Gaming and eSports ETF had 25 holdings. Each position in the top 10 had a weighting of at least 4.7%. Those largest 10 were: Nvidia, Tencent, Advanced Micro Devices, Nintendo, Sea, Bilibili, Activision Blizzard, Netease, NCSoft and Take Two Interactive Software.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay could be one of the best ASX tech shares around at the moment.
I really like the look of businesses that have a long growth runway combined with high and rising profit margins.
Pushpay is aiming for US$1 billion of annual revenue, which would make it into a much bigger business if it can achieve that.
The digital giving business currently has a gross profit margin of 68%. In the FY21 interim result its gross profit margin improved by three percentage points, up from 65%, which suggests to me that there’s more operating leverage to come in the coming years.
At the current Pushpay share price it’s valued at 30 times the estimated earnings for the 2022 financial year.
Other ASX tech shares that look very interesting to me include Redbubble Ltd (ASX: RBL) and EML Payments Ltd (ASX: EML).