I think there are some ASX shares that are worth holding forever.
Not only are these businesses high-quality but they could be around for an extremely long time. That’s why I think the below three ASX shares may be worth holding forever:
Xero Limited (ASX: XRO)
Xero is a leading cloud accounting software business. It has only been around for a decade and a half but it has already made massive market share gains in New Zealand and Australia. It’s also growing really impressively in the UK, whilst making steady progress in the USA.
Accounting has been around for many hundreds of years. Using software is the best way to do it these days. Businesses need software to prepare their financials and lodge their tax returns
Xero is at the forefront of accounting software in the world. It allows accountants and non-accountants alike to easily do accounting and other business processes really easily, in an understandable way. It has loads of useful automation processes and time-saving tools. People will happily pay to save themselves time.
Xero continues to invest in its product to provide the best service for subscribers. The regular monthly cashflow from those subscribers is very attractive considering Xero’s high retention rate and high gross profit margin. That’s great for an ASX share.
In FY20, Xero grew its gross profit margin from 83.6% to 85.2%. This is among the best on the ASX. I think Xero is going to be one worth holding for a very long time as it grows its market share internationally.
CSL Limited (ASX: CSL)
Staying healthy and alive is extremely important to everyone. CSL offers very important products across its various businesses. Its flu vaccines and plasma products are quality and big earners for the company. Its role in manufacturing COVID-19 shows how much Australia needs the healthcare giant.
The company was founded over a century ago, so it shows how much longevity the ASX share already has.
CSL invests hundreds of millions of dollars into research and development every year. This shows that you can think about CSL for the long-term because the company itself is investing for the long-term into new products. It’s the upcoming products that will unlock further earnings for the ASX share.
Unless humanity can somehow change biology, I think CSL’s services will be in demand for many decades into the future. Its high quality and essential products make it an ultra-long-term pick in my opinion.
A2 Milk Company Ltd (ASX: A2M)
Infant formula has been around for many decades. Young children obviously need nutrition and families are always going to pick products that they trust.
A2 Milk is regarded as a high-quality consumer brand which sells premium infant formula, milk and other dairy products.
Compared to many of the other large consumer product businesses, A2 Milk is fairly young at only two decades old. But it has become a juggernaut in the infant formula industry. It’s a real compliment to A2 Milk when other global giants try to copy A2 Milk’s products.
A2 Milk has a global growth strategy and it’s doing well at growing in China and the US. I think it’s going to be growing for many years to come, particularly into markets outside of China. Canada and the US look like very promising growth markets to me.
I think it’s one of the best ASX shares around. Its balance sheet alone is very strong with hundreds of millions of dollars, giving the company a strong position.
The recent decline in the A2 Milk share price makes me think today is a good time to buy shares. It’s valued at 24x FY23’s estimated earnings.
I think these three ASX shares will be quality businesses and leaders in the industries in five years, ten years, twenty years and so on. I’d be happy to have any of them in my portfolio. Indeed, I’d be happy for each of them to be the biggest position in my portfolio. I think they’d be great ideas to hold forever.
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Returns as of 6th October 2020
Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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.