Quality ASX shares could be the way to see through all of the market’s volatility right now.
It has been a tough year for shareholders of some the ASX’s most well-known growth names, such as Zip Co Ltd (ASX: Z1P) and Xero Limited (ASX: XRO). They have seen hefty declines since the start of the year.
Share prices moving up and down is meant to happen on the ASX share market. But a lower price could open up opportunities for investors.
These two are quality candidates:
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This exchange-traded fund (ETF) is based on companies deemed to have strong competitive advantages that are expected to endure for many years to come.
Economic moats, or competitive advantages, can come in many different forms including brand power, intellectual property, or a superior cost base.
According to Morningstar analysts, the businesses in this ASX share’s portfolio have competitive advantages which are expected to last at least a decade — and more likely than not to two decades.
For one of those quality businesses to make it into the MOAT ETF’s portfolio, it must be trading at a good value compared to Morningstar’s fair value estimate.
Some of the names in the portfolio include Compass Minerals, Merck & Co, Constellation Brands, Medtronic, Kellogg, Campbell Soup, Western Union and Mercado Libre.
This ETF has an annual management cost of 0.49%. At 31 March 2022, the MOAT ETF had produced an average return per annum of 16.5% over the prior five years.
Brickworks Limited (ASX: BKW)
Brickworks is a building products company that also owns other assets.
In Australia, it produces a wide array of products, including bricks, paving, masonry, precast and roofing. In the United States, it is a major brickmaker in the northeast of the country.
Brickworks owns a chunk of Washington H. Soul Pattinson and Co Ltd (ASX: SOL) shares. Soul Pattinson is an experienced investment conglomerate with investments across different sectors like resources, telecommunications and agriculture. Its total shareholder return has outperformed the ASX share market over the long term.
Brickworks also owns a 50% share of a joint venture industrial property trust with Goodman Group (ASX: GMG). This trust continues to grow its net rental income – in the first six months of FY22, it saw 7% net trust income growth to $17 million.
The property trust owns several high-quality industrial properties that are leased to major tenants. For example, it recently completed a state-of-the-art facility for Amazon.
After including borrowings of $974 million, the total net asset value of the trust was over $2.5 billion, with the ASX share’s holding worth almost $1.3 billion – up by 38% over the period.
Brickworks said the trust had already secured 221,100sq m of lease pre-commitments, and another 176,400sq m was available for development at the existing estates.
Based on current demand, Brickworks estimated those estates would be fully built out within three years, resulting in additional gross rent of around $60 million and additional leased asset value of $1.5 billion, taking total leased assets to around $4.5 billion.