I believe investing in ASX shares should be about long-term decisions. I think the best holding period is ‘forever’, if it makes sense to hold that long.

There aren’t many shares on the ASX that I think you could actually commit to holding for many decades.

But there are at least two in my portfolio that I plan to hold until I’m 100:

Share 1: Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT) with its portfolio spread across almond orchards, vineyards, macadamias, cattle and cotton.

I like the diversification, it lowers the risks if one particular sector has a tough time. The farms are also spread across different states and climactic conditions. I think the recent drought and fires have shown why it’s important to have farms dotted across the country.

Farmland has been a useful asset for many centuries. I believe it will continue to be a good asset at least until I’m 100.

The ASX share is steadily increasing its cash net rental profit per unit for shareholders, this measure is called adjusted funds from operations (AFFO). In FY18 Rural Funds made 12.7 cents of AFFO per unit, in FY19 AFFO grew to 13.3 cents and in FY20 AFFO is expected to be 13.50 cents.

It’s this AFFO growth that allows management to confidently predict that Rural Funds can grow the distribution by 4% each year. In FY20 Rural Funds is expecting to retain around 20% of its AFFO to re-invest back into its farms. I think a payout ratio of 80% is very healthy for a REIT. 

Investing in productivity improvements is one of the main ways that Rural Funds is growing its AFFO. The tenant gets a better farm after the investment and Rural Funds gets higher rental income with a better valuation for the farm.

Rural Funds has high-quality tenants like Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE) and Olam. Rural Funds has rental indexation built into all of its rental contracts that either have a fixed 2.5% annual increased or it’s linked to CPI inflation, plus market reviews. I think steady income growth is very attractive in the current COVID-19-affected economy.

Share 2: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

I think Soul Patts is a great ASX share. It has been listed on the ASX since 1903, it’s one of the oldest Australian businesses around.

I don’t know what the long-term future holds for any particular industry like telecommunications businesses, banks or supermarkets. But an investment house has the flexibility to change its investments time goes on. In theory, Soul Patts should be able to stay relevant to the economy whatever happens in the future as its investments shift to new opportunities.

Soul Patts’ current investment portfolio has an attractive longer-term future in my opinion. Some of its current larger investments include Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPM), Palla Pharma Ltd (ASX: PAL), Clover Corporation Limited (ASX: CLV) and Magellan Financial Group Ltd (ASX: MFG).

The management team at Soul Patts invest within the business for the long-term. I think that makes it much easier to think long-term about Soul Patts itself.

The ASX share is progressively becoming more diversified as it invests into new sectors. For example, it recently invested into luxury retirement living and agriculture. Soul Patts is now looking to invest into regional data centres. I like these new target areas. 

I think Soul Patts is capable of producing solid long-term returns. It pays a growing dividend which is funded entirely from the investment income it receives, less the operating expenses. This means all the capital growth of the portfolio is retained inside Soul Patts. The net regular operating cashflow that isn’t paid out can also be re-invested for more long-term growth.

Foolish takeaway

I plan to own both of these shares in my portfolio for an extremely long time to come. I think Soul Patts is the ultimate ultra-long-term ASX share because it’s diversified and it can change its positions over time.

More reading

• 3 dividend shares I’d buy to boost my income
• 3 high quality ASX dividend shares for income investors to buy
• 3 long-term ASX 200 shares I’d buy right now
• What are the best ASX shares for dividends?
• 3 high quality ASX shares to bolster your retirement portfolio

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, Treasury Wine Estates Limited, and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I like to keep an eye on substantial shareholder notices. This is because these notices give you an idea of which shares large investors, asset managers, and investment funds are buying or selling.

Two notices that have caught my eye today are summarised below. Here’s what these fund managers have been buying:

Mach7 Technologies Ltd (ASX: M7T)

A notice of initial substantial holder reveals that Australian Ethical Investment Limited (ASX: AEF) has been building a position in this medical imaging data management solutions provider this year. According to the notice, after picking up just over 2.1 million shares last week, the ethical fund manager now owns a total of 11,857,136 Mach7 shares. This equates to a 5.45% stake in the company.

Australian Ethical Investments appears to have been pleased with Mach7’s decision to acquire Client Outlook earlier this month. Client Outlook is a leading provider of an enterprise image viewing technology called eUnity. Management notes that this acquisition expands its addressable market from US$0.75 billion to US$2.75 billion.

McPherson’s Ltd (ASX: MCP)

A notice of change of interests of substantial holder shows that Challenger Ltd (ASX: CGF) has been buying more of this beauty and household products company’s shares. It has added a total of 1,135,019 shares to its holding in June, bringing its total interest to 6,502,799 shares. This equates to a total stake of 6.06%.

McPherson’s shares are only trading at a small discount to their 52-week high, which appears to indicate that Challenger is confident in the company’s future. It may even believe that the company could outperform expectations in FY 2020. In April, McPherson’s released a trading update which revealed that it had experienced strong demand for many of its products during the pandemic.

More reading

• Why Altium, Austal, Challenger, & Mesoblast shares are tumbling lower
• ASX 200 flat: Westpac tumbles, Woolworths reveals strong sales growth, Challenger sinks
• Challenger share price sinks 7% lower following equity raising and final dividend update
• 5 things to watch on the ASX 200 on Tuesday
• Is the Challenger share price a buy?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. and MACH7 FPO. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The James Hardie Industries plc (ASX: JHX) share price dipped today after yesterday’s big run. This may be a good time to be buying as it’s a hot favourite among brokers.

Shares in the building materials group eased 0.5% to $28.49 in the last hour of trade as the stock consolidated its 7% plus surge on Monday after reporting a strong quarterly result.

In my mind, James Hardie stands a head taller than its peers like Boral Limited (ASX: BLD) as it’s a better quality stock in almost every regard.

This can be seen by what brokers are saying about James Hardie following its results. Just about every one of them has come out to reiterate their “buy” recommendation on the stock.

Price target upgrade

Goldman Sachs is impressed with the company’s strong operating performance, particularly in its US business.

The broker lifted its price target by 5.3% on the stock to $34.38 a share and reiterated its “buy” rating on the stock.

Credit Suisse upgraded its 12-month price target on the stock to $30.90 from $27.00 a share as the group’s volumes, margins and sales growth were ahead of expectations.

Management increased its forecast profit margin to between 27% and 29% from 22% to 27%.

The broker thinks that there is limited opportunity for negative surprises in James Hardie’s margin upgrade from “uncontrollable costs”.

Growing stronger for longer

UBS calls James Hardie “a clear standout” and believes the stock still offers value despite its recent outperformance.

“In our view, JHX’s performance through the depths of COVID-19 supports rising long term expectations for volumes [primary demand growth] and margins,” said the broker.

It said in the medium- to long-term, primary demand growth (PDG) will be supported by home owners going ahead with exterior remodelling work once restrictions ease and a return to strong housing activity. The record low interest rate environment and good demand for low dense living are supporting factors.

The broker increased its price target by $3 to $34 a share and it repeated its “buy” call on the stock.

Further upside for the James Hardie share price

JP Morgan is another to reaffirm its “overweight” call on the stock even though it’s yet to adjust its price target of $28.20 a share.

“A key highlight was management’s comment that primary demand growth (PDG) in the US is tracking ‘well ahead of 7%’,” said the broker.

“We’ve yet to factor today’s update into our model but, if we were to increase PDG to 8% and EBIT margins to 27% in the US, our FY21 EPS would move to 83cps, implying a P/E of 23x.”

While a price-earnings (P/E) of 23 times may sound fully valued to some and is inline with the industrials sector, JP Morgan pointed out that James Hardie trades at a 30% premium on average over the past seven years.

More reading

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• Why the AMP share price is up 9% today
• Leading fund manager names 3 undervalued Chinese shares to buy
• Is a Fortescue Metals mega-merger on the cards?
• Leading brokers name 3 ASX 200 shares to sell today

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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