After all the pain experienced by ASX tech shares since November 2021, I think it’s a great time to look at that sector for opportunities.
Due to the nature of software, I think tech businesses can achieve impressive margins and grow quickly. Software can be instantly replicated, whereas making a new table and shipping it across the country has lower margins.
I really like these two ASX tech share names for defensive, yet growing, earnings.
VanEck Video Gaming and Esports ETF (ASX: ESPO)
This exchange-traded fund (ETF) is all about the global gaming and e-sports industry. At the moment there is a total of 26 positions in the portfolio.
This is spread across a few different areas of the gaming sector, but the vast majority of it is allocated to game developers, and semiconductor businesses. Names in the portfolio include Nvidia, Tencent, Advanced Micro Devices, Activision Blizzard, Netease, Nintendo, Electronic Arts, Roblox and Take-Two Interactive Software.
E-sports is now achieving very large audience numbers. This is unlocking earnings streams for the companies involved such as media rights, merchandise, ticket sales and advertising.
The index that this ETF tracks has delivered an average return per year of 12.5% over the past five years, despite the higher interest rates.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is an healthcare ASX tech share. It offers advanced software related to breast screening, for both the patient and the healthcare professionals.
This business has a gross profit margin of over 90%, which means that revenue growth turns into gross profit. It’s currently hurtling towards breakeven as it grows.
The ASX tech share is doing very well in the US, with a market share of using one of Volpara’s products on more than 40% of women in the US who have a breast screening.
The latest quarterly update (for the quarter to December 2022) saw cash receipts rise 42% in constant currency terms to NZ$11.2 million. It also achieved its first positive net cashflow quarter.
If it can start winning market share in Europe, I think it’ll do very well, particularly if it can increase the average revenue per user (ARPU) as its service offers a better understanding of patient risk.
