2 stellar ASX shares to buy and hold

Xero Limited (ASX:XRO) and this stellar ASX share could be great long term options for investors. Here’s why…

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If you are looking to emulate Warren Buffett’s strategy of buy and hold investing, then you may want to take a look at the two shares listed below.

Both have significant potential and have been rated as buys recently. Here’s what you need to know about these top ASX shares:

Adore Beauty Group Limited (ASX: ABY)

Adore Beauty is a growing online beauty retailer that has almost 800,000 active customers in an Australian beauty and personal market currently worth ~$11 billion a year.

Last month the company released its half year results and revealed an 85% increase in first half revenue to $96.2 million. This was well ahead of its prospectus forecast of $89 million. It is also only a very small slice of its overall market opportunity, even when annualised.

This means it has a significant runway for growth over the next decade, particularly given the low penetration of online beauty and personal care sales in Australia.

According to its prospectus, Frost & Sullivan estimate the online penetration rate of the beauty and personal care market in Australia is just 7.3%. This lags international markets such as the United States and the United Kingdom, with estimated online penetration levels of 15.4% and 12.7%, respectively.

Morgan Stanley is a fan of the company. Last month its analysts reiterated their overweight rating and lifted their price target on its shares to $8.75.

Xero Limited (ASX: XRO)

Another ASX share to consider buying and holding is Xero. It is a leading cloud-based business and accounting software provider which provides a full service solution to small businesses.

Thanks to the quality and stickiness of its platform, Xero has been growing its customer numbers and subscription revenues at a rapid rate over the last few years.

This has even continued in FY 2021 despite the impact that COVID-19 has had on many small businesses. During the first half of FY 2021, Xero’s subscriber numbers grew to 2.45 million, underpinning a 21% increase in operating revenue to NZ$409.8 million.

This is still scratching at the surface of its enormous global market opportunity. In fact, Goldman Sachs believes Xero is well-placed to grow its subscribers to 7.4 million by 2030. This is triple its current numbers.

In light of this, Goldman believes Xero is a growth share to own and has recently reaffirmed its buy rating and $157.00 price target on its shares.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Adore Beauty Group Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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