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.