The information technology sector was amongst the hardest hit on Tuesday. Rising US bond yields were likely responsible which resulted in losses from popular ASX tech shares like Megaport Ltd (ASX: MP1), Technology One Ltd (ASX: TNE), Appen Ltd (ASX: APX), Tyro Payments Ltd (ASX: TYR) and NextDC Ltd (ASX: NXT).
If your portfolio is seeing some red at the moment, I wouldn’t be worrying too much. In fact, times like these can present an opportunity to buy companies with the same strong fundamentals.
Here are two I’d buy in a tech downturn.
Xero
Software company Xero Limited (ASX: XRO) might just be one of the most recession-proof tech companies on the ASX.
Businesses need to be able to use accounting software despite potentially deteriorating economic conditions. This is compared to say, a marketing budget, which is often the first to go when a business needs to cut discretionary spending.
We saw how resilient Xero has proven to be from the onset of the pandemic.
By having sticky customers, products with high switching costs and a cashed-up balance sheet, Xero will likely continue to perform well through various market cycles. This is a quality we often look for as part of the Rask investment philosophy.
For more reading on Xero, click here to read: 2 ASX growth shares that are almost recession-proof.
Tyro
Another surprisingly resilient ASX tech pick is EFTPOS terminal company Tyro. It earns most of its money through a small percentage on the transactions processed through its terminals.
But even after various lockdowns and a terminal outage at the start of this year, it’s still been able to grow its merchant base and terminal fleet despite the tough conditions.
To see Tyro’s recent FY21 results, click here to read: Tyro Payments (ASX: TYR) share price rises as revenue accelerates 26%.
Like Xero, I think Tyro also has a sticky product offering where there are switching costs involved. This is due to its terminals often being integrated with the point of sale (POS) or patient management software that its merchants use.
If Tyro can still perform well in a challenging year, I’d like to think it can do even better in more favorable conditions.
As the vaccine rollout continues and lockdowns are eventually lifted in affect communities, Tyro will likely experience an uptick in transaction volumes as we start to move around a bit more.
