I believe the best ASX share investments are ones that we can own for the long-term so the investment thesis has a while to play out to its full potential.
But, I wouldn't just buy anything and hold it for a long time, I'd only want to own investments that I believe could deliver earnings growth for an extended period of time.
Regular earnings growth should help deliver relatively good capital growth in a less volatile way than some cyclical industries. That's why the below two investments look compelling to me.
Propel Funerals Partners Ltd (ASX: PFP)
Propel is the second largest funeral operator in Australia and New Zealand. As morbid as it sounds, I think there are three key reasons to like the business.
Firstly, I'd say it has very defensive earnings. Sadly, there is a certain volume of funerals that occur each year. Plus, the price of funerals is generally rising alongside inflation, so the company has a solid organic tailwind for its top line and bottom line.
The main reason why I think it's a great long-term buy is the fact that it's exposed to the tailwind of rising projected deaths. Propel says that death volumes are expected to increase by 2.8% per year between 2025 to 2035 and then grow by another 2.4% per year between 2036 to 2045. While there may be slight variances to the growth rate some years, there are clear tailwinds for the business.
Over the long-term, I'm expecting the ASX share's operating profit margins to rise over time thanks to operating leverage.
Betashares Global Quality Leaders ETF (ASX: QLTY)
The QLTY ETF is one of the most appealing exchange-traded funds (ETFs), in my view.
I think every Australian would benefit from having good international shares in their portfolio because of the diversification and quality businesses. I'm calling this fund an ASX share because it's about investing in shares and we can buy it on the ASX.
This fund aims to invest in the highest-quality businesses from across the world. Not investing in the 'average' businesses has helped the ASX ETF deliver strong long-term returns. Past performance is not a guarantee of future returns, but it has delivered an average return of 14.5% per year since it was started in November 2018.
It has achieved that return by ensuring the businesses have a strong combined ranking across four characteristics – a high return on equity (ROE), high profitability, low leverage and earnings stability. I think many great businesses today are likely to stay strong for a long time, and this fund will adjust its portfolio if some businesses are no longer of sufficiently high quality. This means it could be a great investment for decades to come.
