It’s Valentine’s Day! The perfect day for you to profess your love for ASX shares. Maybe put your share certificates in a heart-shaped frame.
One of the well-accepted pieces of investment advice is to not fall in love with shares. You certainly shouldn’t fall in love with any old share. And trading your shares every day or every week isn’t going to make any special returns. For those extra-special shares you do need to commit for the long-term to see great returns – you can fall in love with the best ones, just don’t ignore the red flags!
Here are two ASX shares you can fall in love with for a long time:
MFF Capital Investments Ltd (ASX: MFF)
When you think about the different attributes that make a great listed investment company (LIC), MFF Capital has lots of them.
It has low costs, which leaves more of the returns in the hands of investors. It has a global investment mandate, so it can invest anywhere in the world where the opportunities are. Its investment returns have been great and it has a very effective portfolio manager in Chris Mackay who owns close to $200 million worth of MFF Capital shares.
Of course, it also pays a dividend. But not too much of a dividend. When LICs pay a huge dividend it may be unsustainable because it requires that LIC to keep generating a large net return just to maintain its net tangible assets (NTA) per share. Besides, when you have a great investment manager you should want the company to retain more of the profit so the LIC can keep delivering strong compounding returns and so that you personally have a lower taxable income. .
It has been the best-performing LIC over the past decade thanks to the strong performance of its picks like Visa and Mastercard.
MFF Capital is currently trading with an ordinary grossed-up dividend yield of 1.9%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is one of my favourite long-term businesses. It’s been around since 1903, so it’s one of those shares that you can count on to be around for decades to come, particularly because its investment conglomerate nature means it can adjust its holdings to suit changing industry dynamics.
Soul Patts itself doesn’t take on debt for new investments, it doesn’t issue new shares all the time, it has a very healthy amount of cash on its balance sheet, it invests for the long-term in uncorrelated assets and it has excellent management.
You hope in every relationship there will be growth. Soul Patts has definitely delivered on the growth front. In the 15 years to 31 July 2019 it delivered average total shareholder returns of 11.6% per annum, outperforming the All Ordinaries Accumulation Index by 2.6% per annum.
It has grown its dividend every year since 2000, which is very attractive if you want to share in the growth of the business with cash payments as well as capital growth.
Both of these businesses are high-quality ideas, have beaten the market over the long-term and are set up for future strong performance. I think you can fall in love with these two. At the current prices I’d choose Soul Patts, it could be a partnership for life, though I’m sure MFF Capital can keep outperforming the ASX as well whilst Mr Mackay is at the helm.
Where to invest $1,000 right now
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Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company 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 Scott Phillips.
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