In my opinion, every ASX investor should own shares of Altium Limited (ASX: ALU) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
There is definitely merit in sticking to a strategy of just a few of the best exchange-traded funds (ETFs). But if you're investing in individual shares I don't think it makes much sense to buy a bit of a telco or a bit of a miner just for the sake of some diversification.
I only want to own the best shares in my portfolio, ones I have long-term conviction in. For me, two of the ones I have high conviction in are:
Altium
Altium is an electronic PCB software business. It's very important in the design of the latest vehicles, machines and products.
A wide variety of businesses and organisations use Altium services including Google, Amazon, Disney, Qualcomm, Broadcom, Siemens, IBM Research, CSIRO, Bosch, Tesla, John Deere, NASA, Space X, Boeing, Lockheed Martin, ResMed Inc (ASX: RMD) and Cochlear Limited (ASX: COH).
I think it speaks volumes that leaders of various industries choose Altium as their provider of software.
Altium has effective, long-term focused management. It has growing profit margins. It has no debt with a growing cash balance. It generates excellent cashflow. It pays growing dividends.
The company is aiming for revenue of US$500 million by 2025, helped by achieving 100,000 Altium Designer subscribers. This would create excellent growth and see profit margins grow.
Altium could become a huge blue chip in time and I want to stay invested for the journey upwards.
Washington H. Soul Pattinson
The investment house has proven to be one of the best investors in Australia over the past few decades with how consistently it has outperformed the ASX All Ordinaries Index (ASX: XAO).
It's set up in way that could mean we can be shareholders for many years to come without worrying what's going on. It takes long-term positions in businesses that have good long-term prospects for cashflow generation.
Soul Patts has large positions in businesses that offer defensive dividends/earnings like Brickworks Limited (ASX: BKW) and TPG Telecom Ltd (ASX: TPM). It's also invested in businesses with strong growth potential like Clover Corporation Limited (ASX: CLV) and Bailador Technology Investments Ltd (ASX: BTI).
One of the main things that I like about Soul Patts is that it continues to diversify its investments. It has recently expanded into swimming schools, agriculture and luxury retirement living.
Foolish takeaway
I'd personally rather be invested in just these two businesses than own the ASX index due to the heavy exposure to banks and resources. Both Altium and Soul Patts are growing their dividends every year and I'll be surprised if they aren't two of my largest holdings in 2030.
