Investing in ASX shares with a buy-and-hold strategy offers a compelling approach for long-term wealth accumulation. This method leverages the power of compounding over extended periods while minimizing the impact of capital gains tax due to lower portfolio turnover. However, the key to success lies in selecting high-quality investments that promise robust returns over time.
Two standout options for such a strategy are TechnologyOne Ltd (ASX: TNE) and the VanEck MSCI International Quality ETF (ASX: QUAL). These investments are not only promising but have also been personally selected for my portfolio, reflecting my confidence in their future potential.
TechnologyOne Ltd: Riding the Wave of Technological Change
The rapid evolution of technology, particularly in areas like artificial intelligence, underscores the importance of having the right tools for organizational operations. TechnologyOne addresses this need by providing enterprise resource planning (ERP) software to a diverse clientele, including governments, local councils, businesses, and universities.
One of TechnologyOne’s key strategies is its substantial investment in research and development (R&D), allocating approximately a quarter of its revenue annually to this endeavor. This commitment ensures the continuous improvement of its software offerings, thereby unlocking additional revenue streams from existing subscribers through enhanced features.
The company aims for a net revenue retention (NRR) of 115%, indicating a 15% annual growth in revenue from its existing customer base. At this rate, TechnologyOne’s revenue could potentially double in five years.
With a focus on large addressable markets such as the UK and the education sector, TechnologyOne presents an attractive opportunity for long-term investors. Its rising dividend and growing profit margins further enhance its appeal. According to CMC Markets, the stock is valued at 46 times its estimated earnings for FY27, with expectations for its annual recurring revenue (ARR) to exceed $1 billion within a decade.
VanEck MSCI International Quality ETF: A Global Perspective
For those looking to diversify their portfolios with international exposure, the VanEck MSCI International Quality ETF represents a strategic choice. This ETF is designed to provide access to 300 of the highest-quality global businesses across various countries and sectors, making it an ideal vehicle for long-term retirement savings.
The QUAL ETF focuses on companies that exhibit a combination of desirable financial characteristics:
- High Return on Equity (ROE): Companies must demonstrate a high level of profit relative to shareholder funds retained within the business.
- Stable Earnings: Businesses should show consistent upward trends in profitability.
- Low Leverage: Companies are selected based on their low debt levels relative to their size, ensuring sustainability.
By employing this quality-focused strategy, the QUAL ETF has delivered an average annual return of 15.75% over the past five years, outperforming many ASX shares during this period.
Strategic Implications and Future Outlook
The decision to invest in TechnologyOne and the VanEck MSCI International Quality ETF aligns with a broader strategy of seeking out high-quality assets that promise sustainable growth. As global markets continue to evolve, these investments offer a balanced approach to capturing both domestic and international opportunities.
TechnologyOne’s commitment to innovation and its strategic market positioning suggest a bright future, while the QUAL ETF’s diversified exposure to top-tier global companies provides a hedge against regional economic fluctuations.
Looking ahead, investors should consider the potential of these ASX shares as part of a diversified, long-term investment strategy. By focusing on quality and sustainability, these options not only promise attractive returns but also align with broader market trends favoring robust, resilient business models.
