I’d buy the two ASX shares in this article in a heartbeat because of the value on offer and the potential for returns.
I’d want to own companies that are stronger than the overall ASX 200 (ASX: XJO) which can outperform. Otherwise, why invest in that company?
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
WHSP is a diversified investment business that invests in a variety of sectors.
Past performance is not a guarantee of future performance, but in the past 10 years to 30 April 2024, WHSP shares delivered a return per year of an average of 11.3%, beating the 8.1% per year average return for the All Ordinaries Accumulation Index (ASX: XAOA), an outperformance of 3.2% per year.
It’s invested in listed businesses like New Hope Corporation Ltd (ASX: NHC), Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA) and Apex Healthcare. It’s also invested in swimming schools (Aquatic Achievers), Ironbark (financial services) and electrification (Ampcontrol).
Impressively, the business has grown its annual normal dividend every year since 2000, making it one of the best ASX shares for dividend consistency, in my opinion. It offers a fully franked dividend yield of 2.8%.
Xero Ltd (ASX: XRO)
I’d call Xero one of the best ASX tech shares with its position in the global accounting software market.
The company’s recent FY24 result showed a number of positives that I’m looking for, including the 11% growth of subscriber numbers to 4.16 million. One of the most exciting elements of that growth was that it added 107,000 net subscribers in the UK where it now has 1.1 million subscribers. In Australia, Xero added another 205,000 net subscribers to reach 1.8 million subscribers.
The average revenue per user (ARPU) continues to climb at an inflation-beating rate, FY24 ARPU increased by 14% to $39.29. This helps increase the gross profit margin, which improved from 87.3% to 88.2%.
Xero’s profitability margins are rapidly climbing now that it’s focusing on generating more profit. The free cashflow margin improved from 7.3% in FY23 to 20% in FY24, enabling free cash flow to more than triple to $342 million.
With FY25 revenue on track to grow at least another 14%, Xero’s free cashflow looks set to jump again in the next financial year, which I think will excite the market about this ASX share.
