The Motley Fool

Why I think the Soul Patts share price is still a buy

I think the Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price is still a buy despite the broad market recovery today.

The ASX 200 (INDEXASX: XJO) is up 1.8% with some shares shooting higher like Xero Limited’s (ASX: XRO) share price going up 6.7% and the Bega Cheese Ltd (ASX: BGA) share price is up 9%.

The Soul Patts share price is up 2.6%, it hasn’t recovered as much as many of the other shares which dropped as hard as Soul Patts did. The Soul Patts share price dropped 15.4% in just over a week and it has recovered just 4%. For that reason alone, I think it’s an interesting idea for comparative value compared to many shares on the market.

Here are the other reasons why I think the investment conglomerate still a buy:

Excellent longevity

Soul Patts has been operating since 1903. It has thrived despite the various huge global problems in the past. Two world wars, the ‘Spanish’ flu in 1918, the economic collapse that started in 1929 and the GFC, the cold war, various recessions and so on. It has paid a dividend every year since its it started.

It has managed to be such a long-lasting business for various reasons. Soul Patts management are long-term focused, they don’t try to make quick profits. Its balance sheet is conservative, it tries to invest with a contrarian style in uncorrelated assets.

The way it invests and operates makes me believe it will be around for decades to come. The coronavirus is scary for the health reasons, particularly for older people. But, I’m very confident that Soul Patts can easily get through whatever happens this year.

Diverse portfolio

One of the main reasons why I think Soul Patts is a good investment, can last for the long-term and can ride through any issues is how diversified and quality its holdings are.

Some of its top holdings include telco TPG Telecom Ltd (ASX: TPM), building products company Brickworks Limited (ASX: BKW), pharmacy company Australian Pharmaceutical Industries Ltd (ASX: API), listed investment companies Bki Investment Co Ltd (ASX: BKI) & Milton Corporation Limited (ASX: MLT), lipid based product business Clover Corporation Limited (ASX: CLV) and Apex Healthcare Berhad. This is a diverse group. 

It also has investments in unlisted businesses such as Pitt Capital Partners, Round Oak Minerals (a copper, zinc and gold miner), swimming schools and agriculture.  

Willing to take on opportunities

It’s periods like this that Soul Patts is great at navigating. It has a good amount of cash that can be used for protection or investment opportunities.

I don’t know if Soul Patts has deployed much money over the past week, but it is willing to make moves which are good for the long-term during fragile moments. For example, it invested in agriculture during a period of bad drought. It invested in luxury retirement living after a period of falling Australian property prices and difficulties in the aged living sector.

Foolish takeaway

Whilst you shouldn’t invest in a share for its dividend, Soul Patts has a very reliable dividend which has grown every year since 2000, which is another reason why it could be a good idea. I think it has a great chance of continuing to beat the market over the long-term. I’d be happy to buy shares today if trading rules allowed me to.

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Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Brickworks. 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.