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Tech sector tipped for even bigger things in 2014

Last updated: 19:01 29 Dec 2013 AEDT, First published: 20:01 29 Dec 2013 AEDT

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Experts believe it will be another good year for the technology sector, which flourished in 2013 thanks to huge demand for IPOs.

Ernst & Young’s in-depth report on the IPO market reveals tech stocks are the ones to watch in terms of new listings as founders look to make a return on their investments.

“Technology offerings are expected to lead by a big margin on the back of an active Q4 [fourth quarter] 2013 for the industry,” the report argues.

Broker Panmure Gordon‘s top picks for 2014 also include many tech shares.

X-ray imaging company Kromek (LON:KMK) has fared well since offering shares to the public in October, rising 17p to 68p. And Panmure thinks it will continue to soar to 92p in 2014, with plenty to satisfy of news on the way.

2014 will be a “banner year” for Fusionex (LON:FXI), which will begin selling its Big Data analytics solution, GIANT, according to the broker.

The company, whose shares have risen 80% since last December’s float to 375p, is tipped to hit 521p next year by Panmure.

It is also one of the five stocks respected trader Robbie Burns, who goes by the name ‘the Naked Trader’, has bought in the hope that at least one of them will make him a small fortune in 2014.

Noticeably, four of his top picks are from the tech sector – Seeing Machines (LON:SEE), MoPowered (LON:MPOW), Pressure Technology (LON:PRES) and Fusionex – and a drugs firm, Vectura (LON:VEC).

The recent rise of the tech sector has prompted some to ask whether we are in another tech bubble.

Panmure Gordon’s tech analyst George O’Connor does not think so despite the recent listings frenzy reminding him of the mid-90s.

“The sea change has been established for a while,” he explains. 

“I would go back to 2010 when it started to creak open. When I did [an IPO] in 2011 it was like pulling hens’ teeth, but it’s got better since then. So I don’t see it as being any kind of a bubble at all.”

He adds: “Now you’re seeing good returns from IPOs – buying a basket of IPOs is a sure-fire way of beating the index.”

O’Connor expects new listings to keep piling up on his desk and investors to continue pestering him for clues about the next Facebook or Apple.

The success of tech stocks on Wall Street is proved by the recent IPO of micro-blogging site Twitter, which spiked 73% on debut. 

The tech tipster points out that most US investors are not as interested in companies with valuations of less than $1billion, making London a hub for smaller tech firms looking to tap the market for funds.

The recent ISA ruling, allowing private investors to hold AIM shares in tax-friendly savings accounts, has increased the appetite for new shares in the alternative market.

That said, not all tech flotations have made punters rich, he is quick to note.

Take Dublin-based Keywords Studios (LON:KWS) for example, which translates video games into different languages. It has fallen 23% in five months after unveiling a profit warning just two months after joining AIM.

O’Connor says this is a warning to investors hoping to make a quick buck on new tech listings.

“There is a big caveat there, that investors do need to do quite a lot of due diligence.” 

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