There are a few ASX stocks that make up a significant portion of my portfolio. The one that may give me the least stress of all is Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), even though it has a 13% weighting at the moment.
I regularly write about this business as an option for ASX dividend share investors or retirees. However, I also think it makes a lot of sense for me, as someone in their younger 30s.
Everyone should aim to own investments that suit their preferred investment style and objectives. I'm looking for investments that can deliver long-term capital growth and long-term passive income growth. Ideally, my portfolio won't be as volatile as the market during difficult times, but that can't be guaranteed.
The investment conglomerate has been operating for over 120 years. It has shown an impressive ability to thrive through global pandemics, world wars, recessions, stock market crashes and various politicians. There's more to it than just the age though.
There are three main reasons why I don't lose any sleep at all owning this ASX stock.
Highly diversified
The S&P/ASX 200 Index (ASX: XJO) share isn't just a single operating business like a bank or a supermarket – it owns a portfolio of assets.
It's invested across assets like large-cap ASX shares, small-cap ASX shares, credit/loans, private equity and property.
In terms of sectors, it has exposure to areas like building products, financial services, telecommunications, resources, agriculture, electrification and swimming schools.
Looking at the individual businesses that it owns stakes in, Soul Patts owns part of ASX stocks like Brickworks Limited (ASX: BKW), New Hope Corporation Ltd (ASX: NHC), TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG), CSL Ltd (ASX: CSL), Goodman Group (ASX: GMG) and Wesfarmers Ltd (ASX: WES).
By being so diversified, the business significantly lowers its risks compared to most other ASX 200 shares.
Regularly investing in new opportunities
Soul Patts doesn't just sit there with its portfolio and hope for the best. One of my main worries when committing to any ASX stock in the long term is its ability to adapt to a changing world and various economic conditions.
I don't know what the Soul Patts portfolio will look like in 20 years, but I believe it will be future-focused with the potential to deliver good long-term returns.
The company is willing to sell existing holdings and make compelling new investors.
For example, in May 2022, Soul Patts acquired the rest of Ampcontrol it didn't already own in its private equity portfolio. This business provides "electrical solutions for the energy, infrastructure and resource industries". Ampcontrol's earnings before interest and tax (EBIT) are forecast to have doubled between FY22 and FY24 to $37 million.
The business has also been investing in its agricultural portfolio and its credit portfolio, both of which could deliver good long-term returns for the ASX share.
Shareholder-focused
The impressive dividend record – the payout has grown every year since 2000 – shows me that the business wants to reward long-term shareholders with cash payouts.
I think it's also a good sign that the business wants to send some of the cash to shareholders every year rather than trying to build an empire and potentially make too-risky moves.
I'm not expecting Soul Patts to grow its dividend every year – that can't be certain. But, I think a growing dividend can provide a nice source of 'real' returns during investor ownership of the ASX stock.
I do want Soul Patts to make acquisitions every so often if the right deal comes along, as long as the investment team don't overpay for it.
It's not at a bargain price, but I think it can continue to perform over the long term.
