In the 2024 financial year that has just passed us by, ASX shares had an uncommonly good time. The shares of Washington H. Soul Pattinson and Co Ltd (ASX: SOL), or Soul Patts for short? Not so much.
Between 1 July 2023 and 30 June 2024, the S&P/ASX 200 Index (ASX: XJO) rose by a healthy 7.3%. Factoring in dividend returns, anyone who owned an ASX 200 index fund would have banked roughly 12% last financial year. Not bad for an index that typically returns 7-8% per annum.
But Soul Patts shares couldn't quite match that performance. This ASX 200 investing house started July 2023 going for $31.78 each. Last week, those same shares wrapped up FY24 at a price of $32.82.
Sure, that 3.27% gain over FY24 is better than a poke in the eye with a blunt stick. But it falls far short of being a market-matching (let alone beating) investment – a typical criterion we use for assessing the quality of ASX shares as investments.
Soul Patts' dividends do narrow that gap a little. The company forked out 91 cents per share in fully-franked dividends last financial year. At the company's starting FY24 price, that adds a yield worth another 2.86% to Soul Patts' FY24 total return.
Even so, we can conclude that FY24 was a lacklustre one for Soul Patts shares and their owners.
As an owner myself, this doesn't bother me though. In fact, I think it's a great opportunity to pick up some more.
Image source: Getty Images
Buying Soul Patts shares when they're 'marked down'
Why? Well, the legendary Warren Buffett once said, "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down".
Soul Patts is a company that usually delivers market-beating returns, not market-trailing ones. Back in May, the company affirmed that its shares had averaged a total return of 12% per annum (share price growth plus dividends) over the 20 years to 30 April 2024. That beat the ASX market by 3.3% per annum on average.
But not this year. So, by definition, that makes Soul Patts' stock 'marked down', as Buffett would say.
Say Soul Patts blew the lights out with a 20% rise in FY24. If that were the case, I wouldn't be in a rush to buy more shares today. However, as the company had a lacklustre year, it is now high on my buy list for FY25.
If the company sticks to its historical average and delivers a 12% return over the coming 12 months (which I think is very possible, but not guaranteed), I'll be glad to have bought shares.
