Let's talk about the large-cap portfolio of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and the three S&P/ASX 200 Index (ASX: XJO) shares that make up its largest positions.
For readers unfamiliar with Soul Pattinson, the company is an investment business that owns other shares and assets as well as being an ASX 200 share itself.
It has a number of different investment portfolios, including the large-cap mentioned above. Others focus on small-cap and property investments; it has structured debt and private equity portfolios; and a strategic portfolio where it owns large stakes in businesses.
Soul Pattinson says it makes active asset allocation decisions, meaning it doesn't invest to meet a benchmark or replicate an index.
The idea of the large-cap portfolio is that it's actively managed to deliver capital growth, dividends and portfolio liquidity.
Soul Pattinson has deliberately reduced its portfolio size and focused on defensive stocks. It is 'underweight' on bank and mining shares while being 'overweight' on diversified financial, healthcare and consumer staple shares.
Having said that, here are the largest three holdings, which comprised more than 28% of the portfolio at the end of the company's FY23 first half.
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Macquarie Group Ltd (ASX: MQG)
Macquarie is the largest position in the portfolio with a 12.6% weighting.
The ASX bank has four different segments. Two of them are called 'annuity style' businesses – Macquarie Asset Management (MAM) and banking financial services (BFS). MAM had assets under management of A$797.8 billion, while the banking segment is rapidly growing.
The ASX 200 share also has two 'market-facing' businesses of commodities and global markets (CGM) and Macquarie Capital. Higher energy prices have helped boost profitability for the overall Macquarie business.
While downturns may not be helpful for Macquarie's earnings, its long-term expansion plans have helped the business grow. In five years, the Macquarie share price is up more than 60%. Between FY18 and FY22, the company's dividend grew by more than 20%.
CSL Limited (ASX: CSL)
CSL is the biggest ASX healthcare share in Australia. It is developing a number of treatments for patients. It provides protein-based treatments and is a leading provider of in-licensed vaccines. CSL recently acquired a business with expertise in iron deficiency and related anemia.
In the recent FY23 half-year result, the ASX 200 share showed ongoing progress, with its underlying net profit after tax (NPATA) growing by 10% to $1.82 billion in constant currency terms.
Over the past five years, CSL shares have surged by around 80%. Between FY18 and FY22, the CSL dividend has grown by around 40%.
BHP Group Ltd (ASX: BHP)
BHP is one of the world's largest commodity businesses, with iron, copper and coal being three of its largest exposures.
The ASX 200 mining share is exposed to volatile resource prices, so investors can't expect year-over-year growth every time. But, improvements in its efficiencies and operations can help it lower costs, and it's expanding in some areas like copper and potash.
Despite the volatility, and the divestment of its petroleum business, the BHP share price is up around 50% over the past five years. The FY22 annual dividend per share was almost 40% bigger than the FY19 dividend.
