I think there are a few ASX shares that every investor should own.
Some ASX shares may not be suitable because they don’t pay a dividend. Other ASX shares may disappoint because they don’t have enough growth potential – such as a business like Commonwealth Bank of Australia (ASX: CBA).
I own these two ASX shares in my portfolio and I think every investor would benefit by having them in their portfolio:
Altium Limited (ASX: ALU)
I think Altium, an ASX tech share, has a good chance of becoming one of the ASX’s future large blue chips.
It develops and provides electronic PCB software used to design the devices and vehicles of the future. It’s already being used by many of the world’s leading tech businesses like Amazon, Microsoft, Google, Telsa, Space X, John Deere and Broadcom.
I believe that Altium is a good diversified play on the world becoming increasingly technological. The ‘internet of things’ trend is only going to keep going in one direction in my opinion.
FY20 was a pretty difficult year because of COVID-19. Revenue only grew by 10%. However, there was good progress with its aim of becoming the world’s leading electronic PCB software business by 2025, its subscription base increased by 17% to over 50,000 during the year. Altium is aiming for 100,000 subscribers by 2025. This should help deliver US$500 million of total revenue.
Altium has a number of financial factors that make it a very appealing long-term ASX share. It has no debt. Altium has a growing cash balance. Its operating profit margins are growing over the long-term and its dividend is steadily rising as well – though I wouldn’t expect much growth from the final FY20 dividend.
If Altium can become the clear market leader by FY25 then I think Altium could easily beat the market over the next five years. At the current Altium share price it’s trading at 49x FY22’s estimated earnings.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is another ASX share that I think every investor should own.
I think it’s the type of share that you can invest in and not look at for another five or ten years. It’s very long-term focused.
Soul Patts is an investment house that is invested in a variety of industries like telecommunications, building products, property, pharmacies, swimming schools, resources and listed investment companies (LIC). Some of its biggest positions include TPG Telecom Ltd (ASX: TPG) and Brickworks Limited (ASX: BKW).
I think Soul Patts is worth being in every portfolio because it is a long-term market-beater and it’s also a really good dividend share. It has grown its dividend every year for two decades in a row.
In its FY20 half-year result the ASX share showed that over the past 20 years it has outperformed the S&P/ASX All Ordinaries Accumulation Index by an average of 4.6% per annum. Over the past five years it had outperformed the index by an average of 4.4%.
I believe that Soul Patts can continue to outperform the ASX over the long-term from this point as well.
It’s defensively positioned, so I think it can do well even if COVID-19 causes more problems. Two of its largest investments, TPG and Brickworks, have large levers to grow their profit and value over the long-term. TPG is going through a merger with Vodafone Australia whilst Brickworks is expanding in the US and building a large distribution warehouse for Amazon. I like the growth sectors that Soul Patts is investing in recently such as regional data centres and agriculture.
At the current Soul Patts share price it offers a grossed-up dividend yield of 4.1%.
I think both of the above ASX shares are among the best that Aussie investors could buy. At the current share prices I’d probably buy Soul Patts first – I think the next four months could be volatile for a higher-priced share like Altium. I want to see what Altium’s management comments for FY21 are later this month when it releases its FY20 result.
Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now
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Tristan Harrison owns shares of Altium and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of and has recommended Brickworks and 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.