Arguably one of the best ways to generate wealth is to make long term investments. This is because investing for long periods allows you to benefit from compounding.
Compounding is what happens when you earn interest on interest. It explains why a 10% return per annum will turn $10,000 into $11,000 in one year and then into $50,000 in 17 years.
With that in mind, I have picked out two ASX shares that have been tipped to grow strongly over the long term. They are as follows:
Breville Group Ltd (ASX: BRG)
Breville is one of the world's leading appliance manufacturers. As well as the eponymous Breville brand, it also has the Sage, Kambrook, and Baratza brands. It has been growing at a consistently solid rate for the last decade. This has been driven by the popularity of its brands in the ANZ market and internationally.
This has continued in FY 2021, with Breville reporting a 28.8% increase in first half revenue to $711 million and a 29.2% increase in net profit after tax to $64.2 million. This was partly driven by favourable tailwinds brought about by COVID-19 such as working from home and more dining in.
The good news is that it still has a long runway for growth thanks to its international expansion and expanding product range.
UBS is positive on the company. Its analysts are tipping Breville to deliver strong growth over the long term and currently have a buy rating and $35.70 price target on its shares.
Xero Limited (ASX: XRO)
Another buy and hold share to look at is Xero. It provides small and medium sized businesses with a cloud-based business and accounting solution. Xero has been growing strongly thanks to its international expansion, acquisitions, and the transition to the cloud.
The good news is that these drivers are very much still in place and should be boosted further by its growing app ecosystem. If Xero can monetise this ecosystem and execute its international expansion successfully, it has the potential to underpin growth for a long time to come.
Goldman Sachs is very positive on the company and has a buy rating and $153.00 price target on its shares.
Responding to its recent full year results, Goldman commented: "Overall we view the FY21 result as a positive, with Xero showing earlier than expected subscriber traction across all of its key international markets, but without sacrificing unit economics. As a result, we believe the accelerated investment is more than justified, given the enormous TAM the company is targeting."
