Is the Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price a buy today after the Soul Patts share price has risen 22% in a month?
What has been happening recently?
On 24 September 2020, Soul Patts reported its FY20 result.
It has a fairly complex set of accounts because of all of its investment holdings. Group regular profit after tax dropped 44.7% to $169.8 million. Group statutory profit after tax jumped 284.3% to $953 million.
The regular profit was hurt by lower coal prices for New Hope Corporation Limited (ASX: NHC) and lower TPG Telecom Ltd (ASX: TPG) earnings because of the shift to the NBN. The statutory profit rose after the recognition of the strong TPG share price growth.
WHSP's pre-tax net asset value (NAV) fell by 5.3%, outperforming the All Ordinaries Index (ASX: XAO) by 6.9%.
Soul Patts' dividend is funded by the net cash flows from investments, which rose by 48.8% to $252.3 million. That helped the grow the Soul Patts annual dividend by 3.4% to 60 cents.
The Soul Patts share price hasn't been the only strong performer. The S&P/ASX 200 Index (ASX: XJO) as a whole has gone up by 4% over the past month, but clearly Soul Patts has outperformed.
Soul Patts has benefited from the recent strength of the Brickworks Limited (ASX: BKW) share price which has risen in response to various stimulus measures in Australia for the construction industry.
It was also recently announced that both Rob Millner and Tom Millner each invested about $1 million into Soul Patts shares on the market at an average price of around $23.74, which is 7.9% lower than the Soul Patts share price right now.
I think that it's a very good sign when management want to buy shares. If management believe the share price is attractive enough to buy shares then it is probably good enough for regular investors to buy shares as well.
Is it a buy now?
There have been a few developments which should help some of Soul Patts' subsidiaries, particularly Brickworks. New Hope has also seen a growing share price as coal prices rise. So the price rise is largely justified.
I strongly believe that Soul Patts is one of the best long-term ASX shares. I don't think it has the same medium-term profit growth prospects as Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO). But I believe it's the type of business that you can potentially hold forever thanks to its business model and investment strategy.
The Soul Patts share price has been rising for decades. It has actually been listed since 1903, so it's one of the oldest businesses in Australia. The benefit of being invested in an ASX share for the long-term is that you don't activate any capital gains tax events. You don't want your portfolio's compounding growth being interrupted by tax if you can help it, unless another opportunity is worth it.
Soul Patts is one of my favourite ASX shares, but I wouldn't buy it at any price. The recent run up of the price makes me hesitant to buy more for my own portfolio when it's already a large position (particularly after the gains).
If I didn't own any Soul Patts shares then I'd be willing to buy a small parcel today and buy more on price weakness. I think that Brickworks still looks a bit cheaper, so I'd buy the building products business for my Soul Patts exposure for now.
I'm looking forward to hearing more about any new investment directions that Soul Patts takes in light of the COVID-19 pandemic and its impacts.
Due to the recent strength of the Soul Patts share price, I'm looking at other share opportunities at the moment.
