Today let’s take a look at a lightweight tech stock that could see huge returns for the lucky investor. The name we’ll review is Dye & Durham (TSX: DND), a fairly new enterprise tech stock that satisfies a digitalization growth trend thesis.
A new tech stock suddenly taking off
Investors of a certain age may think “Dungeons & Dragons” when they see the ticker DND. Well, to be fair, there is something a trifle perilous about a stock that has rocketed 80% over four weeks. Then again, investors may see that same ticker and think “Department of National Defence.” And again, there is something compellingly defensive about a company that provides risk management services.
So what should TSX investors make of Dye & Durham? On the one hand, there is a strong case to be made for holding a company exposed to the legal sector in a stock portfolio. On the other, its recent share price climb puts it in a precarious position in terms of valuation. After all, this name is fresh on the markets, and has already seen 100% growth off its lowest point.
What makes Dye & Durham so compelling is its mix of low overheads and its appeal for access to the legal sector. With a primary business support focus that revolves around a cloud-based platform, this is a newly listed enterprise tech stock in an area relatively elusive to investors. Its base of services includes legal areas such as court and security filing, and know-your-customer procedures.
It’s this low-impact, low-maintenance nature that might appeal to the general tech stock investor looking for flexible, easily maneuverable business models. Fans of Shopify, Descartes Systems Group, and Kinaxis may see a fellow traveler in Dye & Durham, which has helped it catch some reflected DOCKS stock momentum. One drawback, though, may be that the latter stock doesn’t cover enough ground in terms of business diversification.
Watch out for risk to tech stocks this fall
It’s going to be a highly turbulent second half of the year for tech stocks, as there are several strong currents at play here. There’s the stay-at-home thesis, which has buoyed the e-commerce thesis, sending stocks like Shopify rocketing. As well, the pandemic has emphasized supply chain optimization, pushing names such as Kinaxis higher.
Then there’s the ratcheting bullishness that’s been galloping rough-shod over the markets as though the pandemic wasn’t even happening. This has pushed up consumer discretionaries, such as Apple. But all of these three threads could unravel this fall. A vaccine would completely dismantle the stay-at-home growth thesis. And if the U.S. election turns the While House blue, big-name tech could get a thump on the nose.
Against the backdrop of a tech selloff, the high-momentum plays and forthcoming initial public offerings, you have some sturdy, industry-based names worth going long on.
The DOCKS stocks generally support a digitalization of sturdy business development, making them compelling longer-term investments. With risk abundant as fall draws nearer, these tried-and-tested names might be safer investments.
