I believe some of the best UK shares to buy right now can be found in the technology sector. This year, investment here has boomed, as companies and their customers have had to adapt to the new normal.
But this isn’t a one-off. The digital tech industry grew six times faster than any other sector in the UK in 2019.
With that in mind, I think it could be sensible for investors to own a basket of technology stocks in their portfolios.
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UK shares to buy now
The largest listed UK technology company is accounting software business Sage. With a market capitalisation of £6.2bn, the organisation is relatively small compared to US peers, but that’s no bad thing. Smaller businesses tend to grow faster than their larger competitors in the long term.
Sage’s competitive advantage lies in its market. Changing accounting software can be a time-consuming and expensive process, so customer turnover is low. What’s more, the company’s profit margins are relatively high as distribution costs are relatively inexpensive. By selling the software on a subscription basis, Sage collects a regular fee from customers, securing a predictable income stream for the business.
AVEVA is the second-largest listed technology company in the UK. This business provides technology solutions for engineering companies — a highly specialist business.
AVEVA has been able to carve out a niche for itself and, through select acquisitions, the company has grown steadily over the past five years. I think this trend can continue as the business capitalises on its existing position in the software market.
Consulting growth
Moving away from software, one of the few UK shares with exposure to the hardware market is Computacenter. This company helps other businesses organise technology systems. The demand for these services has been high in 2020.
Computacenter is projected to report a near-30% increase in net income this year. If the company can capitalise on this growth and retain the customers acquired over the past 12 months, I reckon the business will only go from strength to strength over the next few years. As the world becomes more and more reliant on technology, organisations that advise on implementing tech solutions like Computacenter should benefit disproportionately, in my opinion.
Income play
None of the three UK shares profiled above offers much in the way of dividend income. Moneysupermarket.Com, on the other hand, offers what I believe to be one of the best yields in the tech sector. Shares in the comparison website currently offer a dividend yield of 4.5%. What’s more, the group has an impressive track record of dividend growth. The payout has grown at a compound annual rate of 8% since 2014.
Unfortunately, I don’t think the company’s growth is going to match the previous three in the near term as the comparison website market is highly competitive. Nevertheless, as an income investment, I believe this could be one of the best UK shares in the tech sector to own.
