I’m putting my investing money towards Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) at the moment.
WHSP is an investment house business which has been on the ASX for over a century. Its origins are in owning and operating Australian pharmacies, which is where the Soul Pattinson chemist chain comes from, however, that business is now owned by Australian Pharmaceutical Industries Ltd (ASX: API), which WHSP owns 19.3% of. WHSP invests in a large number of companies across a variety of industries such as construction, resources and telecommunications.
Why I’m Buying WHSP Shares
It’s quite hard to find shares that are good value these days after lower interest rates have been pushed so low by central banks like the Reserve Bank of Australia (RBA) and the US Federal Reserve.
There are plenty of shares with exciting earnings growth on the ASX like WiseTech Global Ltd (ASX: WTC) and Afterpay Touch Group Ltd (ASX: APT), but they have valuations to match (or exceed) those expectations.
I think the best way to beat the market at the moment is to find growing businesses at a good price which you can hold for the long term and those shares can compound for a long time. This strategy should mean less brokerage costs and less taxes from gains. Unless you’re in a low tax bracket it probably also makes sense to avoid high yield shares at the moment because their valuations have been pushed up and the yields have been sent down.
That’s why I think WHSP fits the bill.
Good Value
Even after Monday’s 7.25% rise, WHSP looks like it’s good value. Using a rough guess of WHSP’s underlying asset value, it’s probably at a mid-to-high single digit discount to its net assets with the share prices of TPG Telecom Ltd (ASX: TPM) and in-particular New Hope Corporation Limited (ASX: NHC) down in recent times.
You could say it’s a double discount with the underlying assets quite cheap and the WHSP share price a discount to that value.
Growing Business
Holding shares for the long term, perhaps forever, is the best way to reduce brokerage costs and capital gains events. But it only makes sense to hold for a long time if that investment will create good long term returns.
WHSP has been growing for over a 100 years and because it can invest in whatever it likes (listed or unlisted), I believe it should be a relevant investment for a long time to come.
Its total shareholder returns have outperformed the ASX index over the long term and its value, contrarian style could continue to do well.
Increasing Dividend With Solid Yield
I’m also really attracted to the idea of a growing dividend. WHSP has increased its dividend every year since 2000, only one other business on the ASX has managed to do that.
I’m not expecting 10%+ increases from WHSP, but something faster than inflation each year makes me and my family better off than the year before. Besides, I’d rather WHSP keep some of the cash to re-invest into new investment ideas.
WHSP isn’t the only business growing to improve shareholder wealth, the rapidly rising companies in the free report below could also be good ideas.
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Disclosure: Jaz owns shares of Washington H. Soul Pattinson and Co. Ltd at the time of writing, but this could change at any time.
