Shares in listed conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) are down almost 14% from their $19.00 high in April, despite the company just last month announcing record results for FY2017.
Group statutory net profit after tax increased 123% to $333.6m and revenues rose 56%; impressive figures for a company that currently trades on an undemanding trailing P/E ratio of less than 12x.
Despite improved performance, the market appears concerned about the near-term strength of some of Soul Patts' major investments; which include TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API).
The current share prices of these firms are well down from their 52-week highs though I suspect management at Soul Patts aren't panicking just yet.
Instead, Soul Patts takes a value-oriented, long-term approach that has produced annualised returns of 12.8% per annum over the last 15 years, well outperforming the Australian All Ordinaries Index during that time.
The company also boasts of being one of only two ASX-listed companies to have increased its dividend every year for the past 17 years.
Furthermore, Soul Patts is well-diversified; a key contributing factor in its consistent performance. The firm holds significant positions in several ASX-listed companies in addition to the three already mentioned, owns unlisted companies, a property portfolio, and has majority ownership of energy producer New Hope Corporation Limited (ASX: NHC).
In terms of financial position, Soul Patts' recent performance has left the balance sheet in good shape. Cash and cash equivalents at the end of FY2017 cover total current liabilities almost twice over, meaning the firm has little liquidity risk.
Additionally, interest-bearing debt is also relatively low, with cash covering combined current and non-current interest-bearing liabilities four times over.
From this current position of strength, Soul Patts should be able to weather potential short-term underperformance in some areas of its portfolio. However, just as importantly, it means the firm can make further acquisitions without a large increase in debt, should opportunities present.
Foolish takeaway
While some of Soul Patts' major investments may come under pressure in the short-term, the company has a great track record of outperforming the All Ordinaries Index over the long-term and I would not be surprised if this continued. With the share price down from its 52-week high, now could be an opportune time to take a closer look at one of the ASX's most consistent, proven performers.
