It's important to recognise that there are some shares on the ASX that are definitely worth having in your portfolio.
The best businesses in the world like Visa, Alphabet and Berkshire Hathaway are worth owning when they're trading at a fair price.
I believe the best businesses on the ASX are worth owning if you can buy them at the right price. These are two of the ones I'm thinking of:
REA Group Limited (ASX: REA)
REA Group has proven to be an excellent business to own. It enjoys high returns on money invested in the business and is able to continually develop new products and services to drive revenue and profit higher.
I think the company has excellent brand and market power. It's the clear leader of the industry, which means that it attracts the most property sellers, which then attracts the most property buyers and so on. That's a powerful loop which allows REA Group to implement strong price increases regularly.
Over the longer-term it's REA Group's ownership of leading property sites in India, South East Asia and the US that could drive profit higher. These assets don't yet generate much (if any) profit for REA Group, but in five or ten years they could be very large businesses.
However, with REA Group trading at $90 per share, or more than 32x FY20's estimated earnings, it's not cheap. Investors will be hoping for a sizeable increase in property listings to boost earnings over the next 12 months.
Altium Limited (ASX: ALU)
Altium is an electronic PCB software design business that helps engineers design the products and machinery of the future.
It already has an impressive list of clients including CSIRO, HP, Qualcomm, Siemens, GE, Tesla, Space X, Apple, Fitbit, Bosch and Boeing.
The company has big plans to become the leading electronic PCB business in the world with a target of 100,000 Altium Designer seats before 2025 and an aspirational revenue goal US$500 million in 2025.
Altium has lots of things you could want from a growth company with growing profit margins, constant innovation, no debt and a growing dividend.
But it's also trading expensively at 46x FY20's estimated earnings.
Foolish takeaway
Both of these businesses are expensive compared to the ASX market average, but quality is expensive and these prices could seem more sane if the RBA cuts the interest rate by more than two times over the next year.
I'd much prefer to buy shares of these two at least 20% cheaper than today's price, but for a long-term hold I would rather own Altium (or REA Group) over most of Australia's blue chips which seem structurally challenged.
