Long-term investing in ASX shares makes the most sense, in my view. It lets compounding work its magic and also reduces the frequency of capital gains tax (CGT) events that mean handing over money to the ATO, perhaps prematurely.
But, I'd only want to invest in businesses that it makes sense to own for the long-term. Owning a mediocre investment for the long-term won't turn it into a good investment just because we've owned it for longer.
With that in mind, I rate the following investments as two of the highest-quality buys we can pick on the ASX.
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TechnologyOne Ltd (ASX: TNE)
This ASX technology share provides enterprise resource planning (ERP) software for subscribers in multiple countries – important software for the operations of clients.
It has subscribers from across the economy such as local councils, businesses, universities, governments and other organisations.
The business is rapidly growing its annual recurring revenue (ARR) thanks to its software as a service (SaaS) offering, its ability to sell additional software to subscribers and its ongoing wins of new subscribers.
The business has a goal to increase its ARR from existing shareholders at a compound annual growth rate (CAGR) of 15% per year, which means a doubling of revenue in just five years.
If the business can achieve that level of growth then it will go some distance to justify a higher valuation than today. The ASX share seems cheap considering it's down by more than 40% in the last six months.
According to the forecast on CMC Markets, the business is trading at 38x FY27's estimated earnings.
Betashares Global Cybersecurity ETF (ASX: HACK)
One of the strongest global tailwinds over the last 10 to 15 years has been the digitalisation of our way of life and the economy, which has been (and continues to be) a tailwind for the earnings of a number of technology businesses.
But there has also been an increase in cybercrime, which is problematic for businesses and individuals alike, as they are hacked or have their bank accounts/details put at risk.
So many important activities are done online these days such as connecting with government services (including the tax office), work, communicating, education and so on.
All of this makes cybersecurity an essential service to protect people and organisations from cybercriminals.
The HACK ETF gives investors exposure to a portfolio of businesses involved in cybersecurity, which is a great way to get exposure to this industry and be on the side of companies trying to stop cybercrime. Some of its largest holdings include Cisco Systems, Infosys, Palo Alto Networks, Crowdstrike and Broadcom. Past performance is not a guarantee of future performance of course, but the HACK ETF has delivered an average annual return of 13.4% per year over the past five years.
