I believe that one of the best ways to grow your wealth is through buy and hold investing.
By investing with a long term outlook, investors are able to fully leverage the power of compounding.
This is what happens when you generate returns on top of returns. It explains why $10,000 compounding at 10% per annum turn into $11,000 after one year but approximately $26,000 after 10 years.
But not all ASX shares are born equal. So which ones could be compounding machines over the next decade? Let's take a look at three that analysts think could deliver the goods for investors.
Image source: Getty Images
CSL Ltd (ASX: CSL)
CSL has long been one of the ASX's most respected companies — and for good reason. It operates a global plasma products business and a vaccines division, both with high barriers to entry and mission-critical demand. Despite a tough few years following the pandemic, CSL appears to be entering a margin recovery phase.
Bell Potter expects this to underpin strong earnings growth in the coming years. It recently said:
CSL presents an attractive buying opportunity as we expect the margin recovery phase for CSL to drive above-market earnings growth over the next few years […] Given the company's proven quality and growth prospects, we believe significant upside remains.
Trading on a forward P/E ratio of approximately 22x, which is well below its 10-year average of ~31x, CSL looks like a high-quality compounder trading at a discount.
Goodman Group (ASX: GMG)
Another ASX share that could be a compounding machine is Goodman Group. It isn't just a landlord — it is a developer and manager of next-generation logistics, warehousing, and data centre infrastructure. As e-commerce and cloud computing demand accelerates, Goodman is reaping the benefits through strong development margins and tenant demand.
Bell Potter is also positive on Goodman. It notes:
The company is well-leveraged to data centres, a high-growth sector that is driving a strong future development pipeline at higher margins […] we believe the current valuation offers good long-term value for investors.
With a forward P/E of ~25x and double-digit earnings growth forecast, Goodman could be a compelling option for long-term compounding returns.
WiseTech Global Ltd (ASX: WTC)
Finally, WiseTech Global is one of Australia's biggest tech success stories. Its flagship product, CargoWise, is a mission-critical logistics platform used by many of the world's largest freight operators. The company boasts 80–85% recurring revenue, exceptional margins, and a clear global expansion strategy.
Bell Potter thinks very highly of the company. It said:
CargoWise is the market leader in freight forwarding software and we expect growth to accelerate due to the launch of three new products, as well as ongoing global roll-out wins […] WTC is a growth story with strategic acquisitions representing upside potential.
While its shares trade at a premium, Bell Potter notes that this is justified by a three-year earnings per share CAGR of 33% and a dominant market position. This is the kind of formula that can compound quietly for years.
