The potential of super-sized profits is very attractive for most people, which can lead to trading in the latest fad. However, one of the wealthiest people in the world, Warren Buffett, favours a different approach for building wealth on the share market – buying quality companies at attractive prices and holding for decades.
To use a Buffett-esque investing strategy, I think an investment in ASX 200 shares such as Wesfarmers Ltd (ASX: WES), Goodman Group (ASX: GMG) and Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) could deliver investors with solid returns over the long term.
Wesfarmers has continued to perform strongly amid the coronavirus pandemic, largely because of its popular Bunnings Warehouse and Officeworks chains. According to a recent update released on 9 June, Bunnings reported a surge in sales in in 2H20 (to date) of 19.2% and Officeworks saw sales grow by 27.8% for the same period. In addition, Catch.com.au, Wesfarmers’ online marketplace, achieved strong sales growth of 68.7% for 2H20.
The increased demand during coronavirus restrictions is due to people spending more time with DIY projects, studying, working and general shopping from home. Fortunately, Wesfarmers appeared to hold the right businesses at the right time. However, the laggard in performance has been Target, with the company recently announcing the overhaul of its Target stores.
Due to the size of the business, its dominant position in the retail marketplace, I believe assigning Wesfarmers shares a spot in your portfolio could be rewarding over a decade.
In a newsletter presented to investors on 11 June 2020, Goodman presented insights about the business, reaffirming that it remains in a solid position despite COVID-19 disruptions. The group’s performance is supported by the demand for its infrastructure, which has accelerated because of the rise of online shopping amid the pandemic.
In addition, for the 9 months to 31 March 2020, the group reported occupancy rates of 97.5%, which highlights limited disruption in its warehouse facilities. Furthermore, Goodman Group’s $4.8 billion in development work in progress demonstrates the demand for its properties. Future growth in development is expected.
The group is a major beneficiary of the increase in online shopping. By providing online retailers like Amazon with warehouses for stock, I believe Goodman Group should continue to see a lift in demand for its services over the long term.
Fisher & Paykel Healthcare
Late last month, Fisher & Paykel delivered its preliminary final report to the ASX. In this announcement, the group revealed an increase in operating revenue of 18% to $1.26 billion. Additionally, it reported net profit after tax up 37% to $287.3 million.
While Fisher & Paykel has been a key beneficiary to the uplift in demand for healthcare products as a result of the coronavirus pandemic, it has also delivered increases in its earnings over the long term. Looking forward, I see the share benefitting from this continued demand for healthcare products because of an ageing population.
Before buying shares, to analyse whether a share could represent a good long-term investment it’s a good idea to ask whether you believe the company will still be thriving in a decade’s time and try to anticipate if there will still be demand for its products or services.
Take the 3 ASX 200 shares above, for example. People could continue to shop at Wesfarmers for their everyday items either in store and online. In addition, a greater number of the population could be shopping online, requiring more of Goodman’s warehouses. Lastly, the rise in an ageing population could see continued demand for healthcare products produced by Fisher & Paykel.
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Motley Fool contributor Matthew Donald owns shares of Wesfarmers Limited. The Motley Fool Australia owns shares of 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 Scott Phillips.
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