When investors are looking to exploit the power of compounding, finding companies that can be held in a portfolio for decades at a time is important. During a podcast this week, The Motley Fool’s chief investment officer (CIO) Scott Phillips shared an ASX share that might fit the long-term holding criteria.
For the average investor, being able to hold onto an investment through rain and shine requires a company that is so well run and established that investors hardly ever lose any shuteye worrying about the business collapsing. From the outset, this objective can rule out many options.
So, what ASX share does Phillips thinks could be a ‘forever’ stock?
The ASX share with nearly a 120-year-long track record
During a podcast with National Australia Bank Ltd (ASX: NAB) director of SMSF and investor behaviour, Gemma Dale, Motley Fool’s CIO named Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) as his highest conviction ASX share.
In explaining why Soul Patts’ takes the crown, Phillips points to the investment company’s long history, saying:
These guys are the fourth generation of the family. The second oldest company on the ASX — one of those really great bedrock businesses.
Like a lot of things in life, when assessing ASX shares we tend to form our expectations based on the past. While three to five years of good reputation takes effort to create, 100 years or more is outstanding. Such longevity in a company takes a dedicated management team over multiple generations.
Furthermore, Soul Pattinson hasn’t merely existed for a long time — it has excelled. The company is well accustomed to market outperformance. When compared to the All Ordinaries Total Accumulation Index (ASX: XAOA), Washinton Soul H. Pattinson has outperformed for the 1 year, 3 year, 5 year, 10 year, 15 year, and 20 year (as of 31 July 2021) periods.
Adding to this, Phillips said:
It’s tempting to think: old school, boring, fourth-generation conglomerate — who wants that anymore. The answer has been, in the past at least, people who wanted to beat the market.
Soul Pattinson share price snapshot
It was a less rewarding year for Soul Patts’ shareholders in 2021. At one point shares in the conglomerate were up around 30% year-to-date.
However, from October, the share price tumbled from $39 per share to finish the year at $29.16. This meant the ASX share ended up losing 1.6% during the year.