The Altium Limited (ASX: ALU) share price has been going from strength to strength since I first considered adding it to my portfolio.
It was around February 2018 when I initially looked at Altium, a company that develops printed circuit board (PCB) software. With the number of electronic devices in demand, this creates huge growth potential for what the Altium business can offer.
Upon my initial research of Altium, I was very positive and confident it possessed all the key attributes of a successful company. I liked the product, its business model and the fact it was not carrying any debt.
I also liked the fact that this investment would be supported by a market that has developed a reliance on technology — smartphones being a prime example.
So, why didn’t I buy it? The reason is simple. I listened too much to the negative opinions overriding my initial justification as to why it was a potential selection for my portfolio.
At the time, Altium was trading at ~$14 per share. This ‘paralysis’ I was experiencing saw me watch the share price continue to rise. I had identified a company with the potential for long term growth but failed to act.
Eventually, I Caved In…
The decision not to invest got to me as by doing so, I missed an opening to add an exciting prospect to my portfolio.
Eventually, I let patience get the better of me and purchased shares at a time when the markets were swinging aggressively. With the ongoing trade war between the United States and China in recent weeks, I was hoping to pick up a deal of some description.
I had somehow justified in my head that this was my opportunity to invest in the company I had missed out on. I knew I would be buying at a premium price, however, I just felt the need to do it so I could move on.
Purchasing At A Premium
As an investor, I like to do my research and as part of that, I will consider the opinions of others. I believe it can be beneficial to hear opposing views. This can help you re-affirm how confident you are towards investing in a company whilst also supporting your understanding of how well you know the business at hand. If you don’t know the company you are investing in, should you be investing in the first place?
I do not doubt that I will find myself in a position like this again and this is an experience I will learn from. There’s plenty of time to see if this purchase turns out to be a good decision or not.
There will be many people who have the opinion that buying shares at a premium was a bad choice. And they would likely be right. This is far from my usual approach to investing, however, we are all prone to making the wrong decision now and again. After all, we are human and as long as we make more good choices than bad and learn from the experience, then there is every chance you will come out on top.
Why Altium Is An Attractive Investment
Altium was founded in 1985 and has since grown its revenue worldwide to nearly US$172 million for FY19. This revenue consists of ~45% from the Americas, ~36% from EMEA (Europe, Middle East and Africa), ~12% from China and ~6% from Asia Pacific.
Having a strong appetite to achieve double digit-sales and revenue growth each year, management is aiming to increase Altium’s total revenue to US$200 million by 2020. This represents a 16.4% increase on FY19 revenue.
The company is debt-free and is focussed on returning between 50-80% of profit to shareholders twice yearly. Altium’s dividend has grown consistently since 2000, with an upcoming dividend of $0.18 per share on 25 September 2019. This brings Altium’s full-year dividend to 34 cents, a 26% increase on last year.
Now that I am invested in Altium , I will enjoy receiving my dividends whilst also seeking opportunities to increase my holding on the basis that the shares become discounted and my research supports reasons to do so.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing Robert Rooth holds shares in Altium Limited (ASX: ALU).