3 ASX tech shares I would buy today

ASX shares continue to fall, mirroring the US sentiment-driven sell-off of many popular technology stocks.

Further volatility is expected amid fears of a second wave of COVID-19 throughout Europe, as well as more political uncertainty in the US.

The relationship between the US markets and the subsequent rise or fall of the ASX is something that has never fully made sense to me. It would be hard to argue that daily movements of US share prices are affecting the fundamentals of Australian companies listed on the ASX.

Having said that, now could be a chance to pick up some quality companies with the same strong fundamentals trading at a discount. Here are three that I would happily add to my portfolio today.

Appen Ltd (ASX: APX)

Appen has definitely been hit hard recently. Significant insider selling of shares by upper management has eroded investor confidence levels. Appen’s 1H20 result also wasn’t received well, despite achieving strong growth in both EBITDA (click here to learn what EBITDA means) and revenue.

All of this aside, I still see Appen as a quality business with a great track record that operates in an environment of heightened demand for data labelling services. The company is highly cashflow generative and can scale well due to its size. From its high of $43.66 in August, Appen shares are trading for $32.41 at the time of writing.

Source: Rask Media APX 6-month share price chart

Xero Limited (ASX: XRO)

This NZ-born tech giant has firmly positioned itself as a global player in the cloud-based accounting industry. I recently wrote an article on Xero that outlines why I think it could be a further wealth winner.

To summarise, I believe Xero has a lot more room for growth opportunities. Only 20% of its total addressable market overseas has moved to cloud-based accounting software. If Xero is able to execute its strategy well, it could see earnings and margins growing significantly into the future. Additionally, its recent acquisition of Waddle synergises extremely well with its current operations.

I’m not the only one who backs Xero. Hyperion Asset Management recently revealed some insight as to why Xero is the 3rd largest holding in the Hyperion Australian Growth Companies Fund. Deputy Chief Investor Jason Orthman attributes Xero’s large addressable market and diversified, global revenue streams as primary drivers of further growth.

NextDC Ltd (ASX: NXT)

NextDC is a data centre operator that provides data-as-a-service to its clients. To put it simply, clients who want to store their information in the cloud pay NextDC a fee to have it stored in one of the company’s physical data centres. NextDC invests heavily in its infrastructure but takes advantage of strong operating leverage, since allowing a new client to use one of its centres costs very little on a marginal basis.

I would buy shares in NextDC because the company is well-positioned to take advantage of the global trend toward cloud-based technologies. I have strong conviction that the number of businesses switching to cloud-based storage will continue to increase for the foreseeable future. NextDC has faith in this thesis too, with new data centres currently being built across both Sydney and Melbourne.

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Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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