Buy ASX shares for the long term, we’re always told. Don’t try to time the market.
But the irony is the same experts that espouse this to retail investors don’t, or can’t, follow it themselves.
That’s because fund managers are judged by portfolio performance on a monthly, quarterly and yearly basis.
If you have to keep your head above water every month, sometimes you don’t have the luxury of holding onto a quality stock for a long duration, waiting for it to realise its full potential.
So that’s why it’s interesting to hear what professional portfolio managers would do if they didn’t have these short-term pressures.
Here are 5 ASX shares that fund managers would hold onto if the market shut down tomorrow for 5 years.
People say it’s expensive, but it will keep growing
The Montgomery Fund portfolio manager Joseph Kim liked the look of industrial real estate provider Goodman Group (ASX: GMG).
“People are going to say, it looks expensive. It’s [been] ‘expensive’ for a long period of time.”
He told The Motley Fool that 5 years is a long time, but Goodman seems to have all its ducks lined up.
“You’ve got a management team that’s aligned [to a] value-focused business. You can see the pipeline of developments that they have,” Kim said.
“And in the next 2 or 3 years, you should be growing at about 10% [per annum]. The business is getting more valuable over time.”
Goodman shares were trading at $23.37 on Friday afternoon, having risen more than 20% on the year.
A simple business model to understand
For Cyan Investment Management portfolio manager Dean Fergie, RAIZ Invest Ltd (ASX: RZI) is his fund’s biggest holding because he’s happy to just keep holding it.
If you can’t sell the stock for 5 years, it helps if what the company does is easy to understand.
“It’s basically a micro investing platform. It allows retail investors to save by rounding up in their spending,” he told The Motley Fool.
“It allows them to make their own deposits into small investment accounts. It’s all online via an app. It’s all automated.”
Raiz broke off a few years ago from its US parent Acorns, which is now reverse-listing at a US$2.2 billion valuation.
“On similar valuation metrics such as customer numbers and FUM [funds under management], would value Raiz at somewhere around $4 per share,” Fergie said in June.
On Friday afternoon Raiz was trading for $1.90, which is an impressive 94% up for the calendar year.
I’ve already held this ASX share for 5 years
TMS Capital portfolio manager Ben Clark told The Motley Fool that his fund has already held CSL Limited (ASX: CSL) since its inception, which was almost exactly 5 years ago.
“I picked that one because I think, come hell or high water, whatever gets thrown at us over the next 5 years that you couldn’t do anything about because you couldn’t trade the shares, it is a business that is incredibly resilient,” he told Ask A Fund Manager.
“You can sleep well knowing CSL will come through it because it has the balance sheet [and] the industry it operates in is forecast to continually grow.”
CSL’s plasma donation business in the US plummeted last year after the arrival of COVID-19. But Clark was comfortable that it would eventually return as the country moves into a post-pandemic lifestyle.
“Everyone goes on about the vaccines with CSL — it’s a good part of the business. [But] it’s not going to really turn the needle. It’s the blood collection business that’s the engine that drives CSL and that’s had a really difficult year and it should start to accelerate.”
CSL shares are up 4.3% for the year, going for $297.27 on Friday afternoon.
The product will shine through
For those who are willing to take on a bit more risk in return for better gains, Montgomery’s Kim nominated AVITA Medical Inc (ASX: AVH).
“There’s a lot of concern around cash burn and the total addressable market, et cetera. I won’t say it’s not risky because they still need to execute.”
The US company makes regenerative medical treatments, with the current flagship product designed to treat burns patients.
While old habits are hard to shake even in the medical world, Kim admitted.
“But then, ultimately, as a doctor with the duty of care, you’ve got to provide the best outcome to your patients. I think from that perspective, I’m pretty optimistic now.”
Avita shares were trading for $5.10 on Friday afternoon, after hitting $7.37 back in January.
Our ‘most successful investment’
Cyan’s Fergie would be happy to hold onto his fund’s “most successful investment over the past 2 or 3 years” for a further half-decade.
But he admitted Alcidion Group Ltd (ASX: ALC)’s activities are more difficult to quantify than a business like Raiz.
“They provide software to hospitals — patient tracking, nurse paging and clinical decision-making software,” he told The Motley Fool.
“They’re sort of replacing all the [manual work] when you go to hospital and people are just writing on boards to say ‘I’ve given them this medicine and I’ll come back,’ and someone else reads it.”
According to Fergie, the technology platform is now “commercially proven”.
“This year, they’re going to do something like $28 million in revenue. They’re in reference sites, both here in Australia and the UK,” he said.
“It’s a really kind of exciting role, that of new technology. It isn’t widely adopted in a very slow-moving industry.”
Alcidion shares have shot up in excess of 92% this year. The ASX share was trading at 36 cents on Friday afternoon.