2 tech growth stocks that could make you rich

Roulette wheel

Forget all the talk about the world being in the middle of a tech bubble, this isn't 1999. Technology plays a more integral part in our lives than ever, and real companies are making real money. The following two tech-based stocks have struggled in recent months, but they could make you rich in the longer run. Recent setbacks could make a handy entry point.

SEE ALSO: Why I'd buy Lloyds Banking Group plc over these two banks

See also: Why I'd buy this bargain dividend stock instead of Tesco plc

Stay Focused

Micro Focus International(LSE: MCRO) has plunged sharply from its 52-week high of 2,675p, and is currently trading at 1,945p. Investors are increasingly anxious over next month's proposed $9bn purchase of HP Enterprise's software business,which will lift the company's debt to a nerve-frazzling 3.3 times EBITDA. Nerves were further frazzled by last month's news that Micro Focus had presided over a 15% fall in its second half licenses and earnings.

HPE itself then reported poor licence sales, so it began to look like one troubled company trying to purchase another, doubling down on risk. However, I think the worry has been overdone. Playtech's overall business looks stable, with guidance for the first six months of 2018 expected to be steady.The HPE deal still makes sense, given the lack of product overlap, plus the opportunity for cost savings and higher cash flows. Recent dips in licence sales may prove shortlived, and will also make it easier for management to beat these performance comparatives next year.

Software, hard profits

Micro Focus International, which has a market cap of £5.05bn, trades at a forward valuation of 15.8 times earnings, which is relatively low by its recent standards, and yields 3.3%, covered twice. Operating margins of 31.7% add to the investment case. Forecast earnings per share (EPS) growth of 30% in 2018 also attract.

Management has built a solid business on squeezing efficiencies out of mature software schemes and HPE should continue the trend. Micro Focus is a three-bagger over the past five years, one that I believe retains scope for further strong gains.

Play the game

Online gaming specialist Playtech(LSE: PTEC) has also delivered over the long term, its share price is up 160% over five years, although it has also hit a run of bad form lately. However, the FTSE 250 company's prospects remain promising, as it gains market share in live casino games and sports-betting, helped by its recent acquisition of BGT. Management also has a strong M&A track record, which should help it create further value.

This £3.11bn company's prospects look strong, with a forecast 23% growth in EPS in 2017, followed by another 11% in 2018. Revenues are expected to grow sharply while the forecast yield of 3.5% is nicely covered 2.2 times, making this an attractive growth and income play.

Tech boom

Playtech's lacklustre share performance over the past year could also prove a buying opportunity, with the stock trading at a forward valuation of just 13.3 times earnings. Operating margins and return on capital employed are both just over 41%, which impresses. This company generates plenty of cash and has a strong balance sheet to boot. Long-term wealth investors may want to give it a spin.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Micro Focus. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Alternative investments
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Alternative investments

Fine wine is one of the best-performing asset classes of the last 20 years, and prices are still going up as demand from China hits new highs - particularly at the top end of the red wine market.

However, there are no guarantees that this trend will continue, and the experts recommend that nobody goes anywhere near wine as an investment unless they can afford to lose a substantial proportion of their money - or if they would be happy drinking their losses.

They highlight that in 2008 and 2011, the market saw some serious slips - in fact in 2011 it fell 30% - so it’s important to be alive to the risks

We’re used to the idea of the value of cars falling over time, but desirable classic cars can actually gain in value. The most desirable handful of cars have seen their value double in the past four years, while even the kinds of classics that most people can afford are increasing in value by anything up to 20% a year.

However, as with all of these alternative investments, this isn’t guaranteed to continue in the future, so you should never invest what you cannot afford to lose.

Buyers also need to bear in mind that unless they are keeping the car in mint condition in a garage, they need to pay to keep it on the road - which can easily cost £1,000 a year - more if something big goes wrong.

Some owners think of this as the price they pay for the hobby of owning the car - quite aside from the investment - but if you consider the two together, it’s easy to see how even if the car itself increases in value, you’ll end up paying out more than you gain.

According to Knight Frank, antique furniture has had the worst run of all of the luxury investments. Prices fell 8% last year, and are down 22% in five years and 24% in ten.

This is partly because older antique furniture is falling out of fashion. As a result, more fashionable early and mid 20th century pieces have done better, and are up 29% in ten years.

Passing fashions make this a particularly volatile investment, so in this case more than any other, investors should buy things because they want to see them in their home - with the handy side-effect of a potential increase in value if they buy something iconic and unusual.

And while they should buy the best they can afford, they need to ensure they do not spend more than they can lose - or choose to keep in the lounge if the bottom falls out of the market.

Investing in rare coins is one of the most buoyant parts of the alternative market at the moment - with values up 10% in a year, 90% over five years, and 221% over ten years. However, this is definitely an area for experts, because unless you know what you are doing it’s easy to be taken in by counterfeits, doctored coins, and dealers who encourage you to spend more than the coin is worth.

Most people tend to start collecting coins as a hobby, investing to own something they love, hoping they will see some gains, but willing to take a loss on their collection if they ever had to sell. With this sort of approach, the big gains are likely to be well beyond your reach, as they are focused on the top end of the market. However, it should protect you from unaffordable losses if the value of your collection drops.


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