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10 top tech stocks traded in the UK

We don't do tech like America, but Stockopedia's Ben Hobson's list could include unicorns of tomorrow.

13th March 2019 14:03

Ben Hobson from Stockopedia

We don't do tech like America, but Stockopedia's Ben Hobson's list could include unicorns of tomorrow.

Easily the biggest story coming out of the US stock market in recent years has been the stellar rise of technology stocks.

Tech names have seen their valuations rocket, which has propelled the wider market. Some of the best known have been Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet's Alphabet Inc (NASDAQ:GOOGL) (the so-called FAANGs), as well as Microsoft (NASDAQ:MSFT) (which is currently the biggest). And while prices fell sharply across the sector last autumn, the rebound for many has been pretty swift since.

Right now, there are 88 stocks in the US technology sector that are valued at more than GBP £10 billion each. Twenty-four of them are valued at more than £50 billion and 11 at more than £100 billion. Microsoft, the most valuable of all, is valued at £665 billion (or around US $822 billion).

But while the big fish in US tech are genuinely huge, the pool of tech companies in the States is deep and wide. There are more than 830 companies classified in the sector, and while many are huge by most standards, hundreds more of them are small- and micro-cap plays. So the choice for investors is vast.

Alongside predominantly American companies are a few foreign names that have chosen the US as a preferred destination for listing. You can count among them the likes of Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), Tencent (SEHK:700) and Weibo (NASDAQ:WB) from China. Then there's Spotify Technology SA from Sweden/Luxembourg, NXP Semiconductors (NASDAQ:NXPI) from the Netherlands, Russian search engine Yandex (NASDAQ:YNDX) that's legally a Dutch company, Trivago (NASDAQ:TRVG) from Germany and Atlassian Corporation (NASDAQ:TEAM) from Australia. This is not an exhaustive list, but you get the idea…

Tech opportunities in the UK

So while tech has been powering the US market in recent years, how do things stand in the UK? The answer is that homegrown tech giants are a bit thin on the ground. 

Last year, a report by the private capital group GP Bullhound found that "multi-billion unicorns" were on the rise in Europe and that the UK was leading the way on this front - albeit with low single figures. Part of the problem in the past, it seems, is that early stage funding has been a stumbling block for European firms. GP Bullhound points to stark differences between the US and Europe in the numbers of "mega round" fundings of more than £200 million, but again reckons that this is improving.

Interestingly, two potential new UK unicorns in recent years have actually opted for early public listings in order to access capital. On The Beach Group (LSE:OTB), an online holiday booking site, floated two and a half years ago. Despite growing steadily, its valuation has dipped from close to a billion to just over half that. 

Blue Prism, a robotics specialist, is a rare case of a UK tech stock that's earned itself a popular following despite no sign of a near-term profit. Instead, it’s managed to win over investors on the basis that it could have huge long-term potential. 

From an investment perspective, there are interesting comparisons between Blue Prism (LSE:PRSM) and the retail technology group Ocado (LSE:OCDO) a couple of years ago. Back then, Ocado was endeavouring to roll-out its technology but the market didn't really understand it. As a result, Ocado became one of the most heavily shorted stocks in the market - but went on to re-rate dramatically when the deals started coming. If you see Ocado as a tech stock, rather than a retailer, then it’s certainly now up there as one of the biggest quoted tech firms in the UK.

But as it stands, here (in the table below) are the biggest UK quoted stocks in the technology sector, together with some key stats and ratings.

The Risk Rating spectrum is based on the three-year standard deviation of each share, providing an idea of how volatile they are. The spectrum ranges from Highly Speculative, Speculative, Adventurous, Balanced and Conservative (none of the stocks hare are at the extremes of Highly Speculative of Conservative).

In terms of StockRank Style, High Flyers are denoted as high quality, strong momentum stocks. Falling Stars are denoted as being high quality, weak momentum stocks.

NameMkt Cap £mSales £mEPS Growth % 1yRisk RatingStockRank StyleRelative Strength 1y
Micro Focus7,7553,61520.2SpeculativeNeutral-5.3
Sage7,3091,8462BalancedHigh Flyer-2.9
Just Eat5,144779.55.2AdventurousFalling Star-2.4
AVEVA4,793607.715.4AdventurousHigh Flyer47.8
Rightmove4,430267.811.1BalancedHigh Flyer16.5
Auto Trader4,403341.912.6BalancedHigh Flyer21.2
Avast2,938568.48.4SpeculativeHigh Flyer-
Moneysupermarket1,843355.69BalancedHigh Flyer23.2
Sophos1,60252612SpeculativeNeutral-36.7
Softcat1,5401,0828AdventurousHigh Flyer23.4

As you can see, there have been some mixed share price performances from this top 10 over the past year, with AVEVA Group (LSE:AVV), Softcat (LSE:SCT), Moneysupermarket (LSE:MONY) and Auto Trader (LSE:AUTO) delivering the biggest double-digit gains. The largest tech names, like Micro Focus (LSE:MCRO), Sage (LSE:SGE) and Just Eat (LSE:JE.) have actually underperformed the FTSE All-Share, which itself is down slightly over 12 months.

In terms of capitalisation, the biggest of the big tech companies quoted in the UK max out at £7.7 billion (Micro Focus) and quickly tail off. Softcat wraps up the top 10 with a market cap of £1.5 billion. In total there are 217 stocks quoted in the UK technology sector.

The future for UK tech investing?

You could argue that technology stocks have represented a big part of the difference between market performance in the US and UK in recent years. While the American market has been driven by a huge tech sector and a handful of large, powerful stocks, the UK just hasn't seen anything like the same. 

But that doesn't mean the future doesn't hold some excitement for UK investors. Evidence suggests that the early stage funding environment is improving, and that should feed through to tech IPOs in the coming years. Meanwhile, despite the dearth of big names, there is still a considerable number of smaller cap technology stocks quoted on the market. Hidden amongst them could be some of the unicorns of tomorrow.

About Stockopedia

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These investment articles are simply for generating ideas. If you are thinking of investing they should only ever be a starting point for your own in-depth research.

interactive investor readers can get a free 14-day trial of Stockopedia here.

These investment articles are simply for generating ideas. If you are thinking of investing they should only ever be a starting point for your own in-depth research.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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