Even in this fast-moving world of ours, the last 12 months have stood out as seeing significant evolution in the field of technology. It’s not just the NASDAQ that’s home to the leading innovators, however! Brits can look closer to home, nestled in amongst the Footsie and FTSE 250…
Halma
What it does: Halma is a life-saving technology company committed to growing a safer, cleaner, and healthier future.
By Paul Summers. I’d rather buy stock in a tech innovator whose products are essential rather than just desirable. FTSE 100 member Halma (LSE: HLMA) fits the bill nicely.
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A group of around 45 companies, Halma produces safety technologies for industrial and logistics operations, monitoring and protecting the environment and enhancing the quality of care delivered by healthcare providers.
I don’t know about you but I can’t see demand for these falling away. I therefore fully expect the company to continue raising its dividend by 5% or more every year for the foreseeable future, just as it’s done for the last 44 years!
The drawback to all this is that Halma stock never trades on a low earnings multiple. That said, I reckon the ongoing (but probably temporary) aversion to growth-focused companies among UK investors provides me with as good an opportunity as any to get involved.
Paul Summers has no position in Halma
RELX
What it does: RELX is a global provider of information-based analytics and decision tools for professional and business customers.
By Andrew Mackie. My Stocks and Shares ISA remains relatively underexposed to the tech sector. This is mostly due to the rich valuations across the board. However, I do invest in tech businesses where I see a clear competitive advantage. RELX (LSE: REL) is one such tech innovator.
Its powerful datasets across risk, legal and insurance are being continually upgraded with AI tools. Launched last October, Lexis + AI is likely to be a game-changer for the legal profession. This solution offers conversational search, intelligent legal drafting, insightful summarisation, and document upload and analysis capabilities.
Its Risk division is another area primed for explosive growth over the coming decade. Financial crime compliance and digital fraud are two such areas. But equally important is insurance risk. Its proprietary data analytics and decision tools enable insurance businesses to improve their offerings across the value chain.
RELX isn’t a cheap stock, with a trailing price-to-earnings multiple of 36. Should the euphoria over AI diminish, its share price will likely fall. But as an investor who takes a long-term view, I remain bullish on its prospects.
Andrew Mackie owns shares in RELX.
RELX
What it does: RELX is a global provider of information and data analytics for customers across the scientific, medical and legal professions.
By Ben McPoland. FTSE 100 data firm RELX (LSE: REL) is fully embracing the huge potential of new technology and has already launched generative AI in its LexisNexis legal business.
This Lexis+ AI solution features conversational search, intelligent legal drafting and summarisation, and document upload and analysis capabilities. Because it is grounded in RELX’s vast repository of legal information, the risk of invented content (hallucinations) is massively reduced.
CFO Nick Luff said this AI tool is already creating “significant efficiency gains, whether summarising documents, conducting research, legal research or drafting court submissions.”
Last year, the firm’s adjusted operating profit grew 13% to £3.03bn on revenue of £9.16bn (up 8%). And this year the company has launched a conversational AI product in its scientific, technical and medical unit, which will support clinicians in delivering high-quality patient care.
The stock isn’t cheap trading at 27 times forward earnings, which potentially adds some valuation risk.
However, given the fact that generative AI is set to reinforce RELX’s business model, I reckon this innovative FTSE firm deserves a premium valuation.
Ben McPoland does not own shares in RELX.
S4 Capital
What it does: S4 Capital is a digital media advertising agency network based in the UK, with operations worldwide.
By Christopher Ruane. Owning shares in S4 Capital (LSE: SFOR) has led to me nursing a sizeable paper loss. Directors own a large proportion of the shares but have largely not been buying lately, despite the share price collapsing by almost two thirds over the past year.
Despite that, I do see S4 as a tech innovator. Its digital-only model in the massive global advertising industry means that it is designed for what the marketing world looks like now rather than in the past.
So why have the shares been falling?
Past accounting delays have shaken City confidence in the company’s management, although it has made positive strides in that direction. The company is lossmaking. It has added debt to its balance sheet in recent years.
Clearly, this stock has risks. But I expect debt to fall and cost control could help move the company to profit. Its valuation looks cheap for the potential and I continue to hold.
Christopher Ruane owns shares in S4 Capital.
Sage Group
What it does: Sage Group supplies integrated accounting, payroll and human resources services mainly to small- and medium-sized companies.
By Royston Wild. Over the past 43 years, Sage Group (LSE:SGE) has steadily evolved its services to become one of the world’s top five enterprise resource planning (ERP) providers.
The FTSE 100 firm’s bread and butter is the supply of accounting and payroll software. And it is now investing heavily in artificial intelligence (AI) to enhance the functionality of its cloud-based services.
It recently launched Sage Network Inbox and Sage Copilot, the first tools in the company’s stable to make use of generative AI. Chief executive Steve Hare has predicted that machine thinking will “change the nature” of accounting, and the firm is seeking to put itself at the forefront of this revolution.
Sage’s share price has soared during the past 12 months. And this leaves it trading on a forward price-to-earnings (P/E) ratio north of 35 times.
High multiples like this are common among tech stocks. But remember that elevated numbers like Sage’s also make a price correction more likely if bad news comes along that spooks the market.
Royston Wild does not own shares in Sage Group.
