I’d recommend buying both of these ASX shares below as ways to invest for the long-term.
Long-term investing makes a lot of sense to me, it means being able to benefit from compounding for the most amount of time, while reducing the amount of capital gains tax we may need to pay each transaction.
Wesfarmers Ltd (ASX: WES)
There are few businesses on the ASX that have delivered the long-term success that Wesfarmers has, in my eyes. The success of Bunnings, Kmart and Officeworks is hard to match in the Australian retail world. It also has a steadily growing chemicals, energy and fertiliser (WesCEF) division which should soon include lithium earnings from Covalent Lithium (a joint venture).
Why is it such a good option? It has great economics with an excellent return on equity (ROE). But for the long-term, what really excites me is its ability and track record of acquiring and divesting businesses. It is able to redirect its capital towards industries where it seems to have good profit growth potential. In recent years, it has divested its coal mines, Kmart Tyres and Auto, and Coles Group Ltd (ASX: COL).
I like its move to invest in e-commerce, lithium and (digital) healthcare – I reckon all three of those sectors have good growth prospects.
According to projections on CMC Markets, Wesfarmers shares are priced at 25 times the estimated earnings for the 2024 financial year, with the ASX share offering a projected fully franked dividend yield of 3.5%.
Vaneck Morningstar Wide Moat ETF (ASX: MOAT)
While not technically an ASX share, it’s an exchange-traded fund (ETF) which purely invests in strong US businesses.
How strong are those businesses? That’s up to investors to decide – I’d say very strong.
All US shares that could possibly go into this portfolio are judged to have competitive advantages, or “economic moats”. The stronger the moat, the harder it is for an invader to attack the company we’re talking about. But, it’s not the size of the moat that matters to Morningstar, it’s how long the competitive advantages are expected to endure.
The stocks in the portfolio have been judged to have economic moats which will almost certainly endure for the next decade and probably more than two decades.
Once the US stock market has been reduced to this list of strong businesses, the portfolio only buys shares of businesses if they’re attractively priced.
This portfolio of good value, long-term businesses is working very well. There will be times of underperformance, but I think the MOAT can serve Aussie investors who are focused on ASX shares very well.
