The ASX stock Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is the one S&P/ASX 200 Index (ASX: XJO) share that I'm planning to buy a lot more of for my portfolio.
For readers who don't know, this business is an investment house that has been listed since 1903. It started as a pharmacy business and has paid a dividend every year since it listed, which is an impressive record. Over the years it steadily invested in an increasingly diverse group of businesses, with Brickworks Limited (ASX: BKW) being one of the first investments.
Strong fundamentals of this ASX stock
The ASX stock has delivered impressive returns over the long term.
As of 30 April 2023, the business had achieved average shareholder returns per annum of 12.9% over the prior five years and past 20 years, outperforming the All Ordinaries Accumulation Index (ASX: XAOA) by 4.5% and 3.7% per annum, respectively.
How has it managed to do so well? Diversification is part of it, but it's how the investment portfolio has been constructed.
It's designed to be invested in a range of investments that "perform throughout the cycle". Soul Pattinson focuses on "robust, defensible business models and uncorrelated asset classes."
At the end of April 2023, the ASX stock said its "deliberately conservative positioning" was awaiting investment opportunities outside of public markets. It had $553 million cash at the bank, with an average yield at the time of 4.3%.
The business is invested across a number of different areas including ASX blue-chip shares, ASX small-cap shares, private equity, property, structured yield and a few major equity positions. Some of those strategic investments include Brickworks, TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC) and Tuas Ltd (ASX: TUA).
Why I'm going to load up on Soul Pattinson shares
I believe this ASX stock has demonstrated incredibly impressive longevity to last 120 years and it seems set up to last for a very long time to come. Its flexible investment mandate allows it to invest in essentially anything that it views as an opportunity, and divest assets that it wants to. I think it can continue to future-proof itself.
I like that it has grown its annual ordinary dividend every year since 2000. It has done this by using the cash flow generated from the portfolio, paying for its expenses and then sending the majority of that remaining cash flow to shareholders as a dividend.
This approach has enabled the business to re-invest the retained cash flow and benefit from the capital growth of its investments over the long term. This financial setup means I can plan to hold my Soul Pattinson shares forever, and it'd be great to add a lot more to my portfolio.
Today's price isn't the best price of 2023. I'd prefer to invest at under $30, or even under $27.50. However, I expect the current valuation could still mean long-term outperformance because of the fundamentals that I talked about above.
If it did drop below $30, then I'd use that opportunity to invest significantly into Soul Pattinson shares.
