When you are building a portfolio of ASX shares, I believe there are some companies you should consider never selling. To paraphrase Warren Buffett, the best holding period is forever. That’s because time is your greatest advantage as a retail investor. When left to work its magic, the snowball that is compound interest has the potential to grow your ASX share portfolio wealth exponentially.
Careful consideration must be given to ASX shares you plan to hold forever. In my opinion, these need to possess some crucial characteristics:
- A wide moat – This is basically a competitive advantage such as a network effect, first-mover advantage, high switching costs or high barriers to entry.
- Optionality – The ability to diversify and pivot the business to growth markets.
- Financial fortitude – Having a strong balance sheet with lots of cash and little debt.
On that note, here are five ASX shares in my own portfolio that I plan on holding on to forever.
5 ASX shares I plan on never selling
BetaShares Asia Technology Tigers ETF (ASX: ASIA)
ASIA is on my list because it provides market capitalisation weighted exposure to a geographic location that will be an economic powerhouse long into the future. This diversification helps to balance my portfolio, whilst giving me access to fast growing innovative stocks such as Alibaba and Tencent.
Mercadolibre Inc (NASDAQ: MELI)
Mercadolibre isn’t technically an ASX share. However, it is one of my highest conviction holdings. Often referred to as the eBay Inc (NASDAQ: EBAY) of Latin America, the stock has grown far beyond that. The eCommerce company now has a massive payment processing network called Mercado Pago, that provides another huge growth driver for the stock.
This optionality, when combined with the share’s top dog status, should provide market beating returns well into the future.
Nanosonics Ltd (ASX: NAN)
Nanosonics is a leader in the disinfection of ultrasound probes. This ASX share has been a long-term market beater and I think this will continue. Operating with the ‘razor and blade’ business model, Nanosonics is successfully growing its installed base of trophon® and trophon® 2 machines. Nanosonics can then sell more high margin consumables products and boost profitability.
ResMed Inc (ASX: RMD)
ResMed is a leader in the treatment of sleep apnea. Sleep apnea is a hugely underdiagnosed condition that can have significant impacts on a sufferer’s quality of life and health. As the company and physicians continue to further education regarding the condition, I can see a greater adoption of ResMed’s products.
Furthermore, the company’s move into data and internet connected devices should provide optionality in the future.
Xero Limited (ASX: XRO)
If you run a small or medium sized business, you’ve probably heard of Xero. Xero provides its customers with a best-in-class cloud accounting solution. Its customers have primarily been in Australia and New Zealand, however the business is also expanding into the United Kingdom and the United States.
I believe the digitisation of tax and accounting reporting across the globe is a nice tailwind that Xero can ride to significantly increase profitability. Another reason I love this ASX share is that it has a third-party marketplace for products that work with Xero. Apple, Inc (NASDAQ: AAPL) and Atlassian Corporation PLC (NASDAQ: TEAM) are great examples of this high margin revenue.
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Lloyd Prout owns shares of BetaShares Asia Technology Tigers ETF, MercadoLibre, Nanosonics Limited, and ResMed Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Atlassian, and MercadoLibre. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends eBay and recommends the following options: long January 2021 $18 calls on eBay and short January 2021 $37 calls on eBay. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF and Nanosonics Limited. The Motley Fool Australia has recommended Apple and ResMed Inc. 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.