One of the ways that legendary investor Warren Buffett has generated wealth over decades of investing is by buying and holding the shares of quality companies. This investment strategy is highly successful due to the power of compounding.
Compounding is interest on top of interest, or returns on top of returns for investments. It explains how an investment earning a 10% per annum return will double in value in a little over seven years.
With that in mind, listed below are two ASX shares that could be quality candidates for a buy and hold investment. Here’s what you need to know about them:
Altium Limited (ASX: ALU)
Altium is an award-winning printed circuit board (PCB) design software provider. PCBs are the circuit boards you find in almost all electronic devices.
Given the proliferation of electronic devices globally and their complex designs, demand for its software has been growing very strongly over the last few years.
And while COVID-19 is hampering Altium’s growth and recently led to discounting, demand is expected to pick up again once the pandemic passes.
Looking ahead, management continues to target subscriptions of 100,000 and revenue of US$500 million by FY 2025/26. This will be a big increase on FY 2020’s ~51,000 subscriptions and revenue of US$189.1 million.
Citi is positive on the company. It recently retained its buy rating and $33.50 price target on Altium’s shares.
Domino’s Pizza Enterprises Ltd (ASX: DMP)
Another quality candidate for a buy and hold investment could be Domino’s.
This is due to its talented management team and their long-term thinking. Domino’s may be smashing expectations in FY 2021 with some very impressive sales and profit growth, but that doesn’t distract it from thinking about the next decade.
Domino’s finished the first half of FY 2021 with a network of 2,800 stores. It is now aiming to double this by 2023 in its existing markets. Management is also looking for acquisitions and could expand into new territories in the future. This would give it an even longer runway for growth.
Morgans is very positive on the company’s future. The broker currently has an add rating and $119.00 price target on its shares.