3 reasons Wesfarmers shares should be on your ASX watchlist

I’m not a buyer at the current Wesfarmers Ltd (ASX: WES) share price, but I think you should watch this old-school conglomerate closely.

3 reasons Wesfarmers shares should be on your watchlist

  1. Great businesses.

Wesfarmers is one of the few Australian companies that owns a stable of top quality businesses. For example, it owns Coles, Bunnings Warehouse, Kmart, Target, Officeworks and more.

Alongside Washington H. Soul Pattinson & Co. Ltd (ASX: SOL), Wesfarmers has shown how taking large bets on quality businesses and holding them for the long-term can compound into something special.

  1. Good management.

One thing that is often undervalued amongst sharemarket investors who are focused on the here and now is good management. If you are a long-term investor it’s important that you have company CEOs that think like you, have skin in the game and stay in the job long enough to reap the fruits of their labour (or eat their own cooking).

Wesfarmers’ board and senior management fit the bill. Wesfarmers’ Managing Director Richard Goyder has been with the company since 1993 and has been in control of the company for more than 12 years. He is due to be replaced by Rob Scott.

  1. Valuation.

For the record, I would rather buy an overpriced good quality business than a cheap poor quality business.

As much as I would like to buy Wesfarmers shares right now I think they deserve to remain on a watchlist. With over 10,000 companies listed on the ASX and international markets, we can all afford to be choosy and wait for a bargain valuation before buying shares.

In my opinion, like any business, Wesfarmers is not immune to share price falls.

Therefore, I believe patient investors might be better off keeping its shares on their watchlist until we are offered a more compelling entry point.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia owns shares of Washington H. Soul Pattinson and Company Limited and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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