When I am thinking about long-term investing, I tend to focus on a simple idea.
Find businesses that can keep growing over time, supported by strong demand and durable competitive advantages.
They do not need to be the fastest-growing companies every year. What matters more is consistency and the ability to compound over many years.
Three ASX shares that I think fit that description are in this article.
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ResMed (ASX: RMD)
Healthcare is an area where I like to look for long-term winners, and ResMed stands out to me.
The company focuses on sleep apnoea and respiratory care, which I believe are supported by long-term demographic and health trends.
An ageing population and increasing awareness of sleep disorders could continue to drive demand for its products and services.
I also like that ResMed has been building out its digital health ecosystem, which could enhance patient outcomes and strengthen its competitive position over time.
For me, it is a combination of defensive characteristics and growth potential, which is not always easy to find.
TechnologyOne Ltd (ASX: TNE)
TechnologyOne is probably one of the quieter achievers on the ASX, but I think that is part of what makes it interesting.
It provides enterprise software, particularly to government and education sectors, and has successfully transitioned to a software-as-a-service model.
What stands out to me is the consistency.
Recurring revenue, high margins, and long-term customer relationships all point to a business that can compound earnings over time.
It may not grab headlines in the same way as some other tech names, but I believe that reliability can be a real advantage for long-term investors.
REA Group Ltd (ASX: REA)
REA Group adds a different type of quality.
It operates one of the most dominant digital platforms in Australia through realestate.com.au, which gives it a very strong competitive position.
What I like here is the combination of pricing power and network effects. Agents need to list where buyers are, and buyers go where the listings are. That creates a reinforcing cycle that is difficult for competitors to break.
The business is also highly profitable, with strong margins and the ability to grow earnings over time as the property market evolves and digital penetration increases.
For me, REA Group is an example of a platform business that can continue compounding over many years.
Foolish takeaway
I think long-term investing is about owning businesses that you can hold through different market cycles without constantly second-guessing the decision.
ResMed offers exposure to global healthcare demand with a growing digital component, TechnologyOne provides a steady, recurring revenue model that continues to scale over time, and REA Group brings a dominant platform with strong pricing power and long-term growth potential.
Overall, the three have the kind of characteristics I think can support long-term compounding.
