I think that one of the best ways for investors to grow their wealth is to make long-term investments in ASX stocks.
That's because buy and hold investing allows you to take advantage of compounding.
This is what happens when you generate returns on top of returns. It accelerates your wealth creation.
But you can't just buy and hold any old stock. You need to find companies that will perform positively over a long period.
With that in mind, let's take a look at a couple of ASX stock picks that could be worth considering over the long term. They are as follows:
CSL Limited (ASX: CSL)
This first ASX stock pick is biotechnology company CSL. It is the name behind the CSL Behring, CSL Vifor, and CSL Seqirus businesses. These are the leaders in their respective fields of plasma therapies, iron deficiency and nephrology, and influenza vaccines.
CSL has been growing at a solid rate for decades and appears well-placed to continue this trend for the foreseeable future thanks to the quality of its businesses, its significant investment in research and development, and strong demand for its products.
The team at Bell Potter highlights that CSL has a "proven track record of deploying capital effectively and generating high returns over the past 25 years." This is exactly what you want from a long-term investment.
And with its shares trading at an attractive level, the broker thinks that now could be a good time to snap them up. They recently said:
The company has a CSL presents an attractive buying opportunity as we anticipate the start of a margin recovery phase for CSL, driving above-market earnings growth over the next few years. CSL trades at a 12-month forward PE of ~31x, representing a discount to its 5 year average of ~35x. Furthermore, the company will continue to deleverage the balance sheet over the next few years. Given the company's proven quality and growth prospects, we believe significant upside remains.
Bell Potter has a buy rating and $316.50 price target on its shares.
Xero Ltd (ASX: XRO)
Another ASX stock pick to consider for the long term is Xero. It is a leading cloud accounting platform provider.
Goldman Sachs believes it would be a great long term option due to its huge market opportunity. It notes that with 4.16 million subscribers, Xero is only scratching the surface of its incredibly large total addressable market (TAM). It explains:
We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company's pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – the stock is Buy rated.
Goldman has a conviction buy rating and $201.00 price target on its shares.
