ASX 200 (ASX: XJO) shares can be a good place to find high-quality companies with attractive long-term potential.
Businesses that can steadily increase their underlying earnings and grow their operations have a wonderful chance of delivering good shareholder returns. I’d call both of the below stocks buys after recent declines.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
WHSP is an investment house that owns a wide variety of assets from a number of different industries. Its investments include telecommunications, resources, building products, property, swimming schools, financial services, credit/lending, electrical parts, farming and so on.
At the time of writing, the WHSP share price is down more than 5% from 8 March 2024, but its HY24 result was as commendable as most of its other reports are. The portfolio value, or net asset value (pre-tax) increased 10% to $11.5 billion and the net cashflow from investments grew 6.9% to $263.4 million.
I believe WHSP will continue to make sound long-term investments that can increase its cash flow, leading to growing dividends and a rising portfolio value.
Management and the investment team of the ASX 200 share have shown a skill of investing in the right areas at the right times, and avoiding other areas. It’s currently one of my larger positions and one day it may be the largest.
Xero Limited (ASX: XRO)
Xero is one of the largest ASX tech shares, with an impressive presence in Australia, New Zealand and the UK. The Xero share price has dropped 9% from 13 March 2024.
It provides cloud accounting software, which can save accountants, bookkeepers and business owners a lot of time, particularly with the new AI tools that Xero is working on.
I think Xero can become a significantly more profitable business as time goes on, thanks partly to its very high gross profit margin. Its rapidly-growing subscriber numbers are boosting the revenue and unlocking strong operating leverage.
In the next few years I believe Xero’s profitability is going to significantly rise and this could encourage investors to keep paying more for Xero shares.
Management are still very confident of long-term growth – I am too, particularly with so many other potential countries for the ASX 200 share to expand into.
