Could Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) (WHSP) be the safest ASX share?
WHSP is a large investment house, meaning its purpose is to invest in other businesses and assets.
Why is it a safe option?
It can be tricky being a single business with just one key source of earnings. Look at the demise of some things like department stores, Blackberry and Blockbuster. Disruption can come along.
Who knows what the next industry to face difficulty will be?
Many ASX shares are focused on just one sector – resources, retail, banking and so on.
However, WHSP has a diversified portfolio spread across a wide array of assets. Industries that it’s invested in include telecommunications, building products, resources, financial services, agriculture, swimming schools and so on.
It has various portfolios, including a large cap portfolio, a private equity portfolio, an emerging companies portfolio, a ‘structured yield’ portfolio and property. It has a ‘strategic portfolio’ with names like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC) and Tuas Ltd (ASX: TUA).
The investment style
It’s diversified, yes. Diversification is good. But diversification alone doesn’t make it the potentially safest option.
It is unconstrained. A flexible investment mandate allows the business to invest in and support companies from an early stage and grow with them over the long-term.
WHSP aims to invest for the long-term by being disciplined and having a value-focused approach to investing through market cycles to deliver returns over the long-term.
Perhaps most importantly, WHSP tries to provide capital protection. It has built a portfolio of assets that can generate reliable cash flow through market cycles which can protect ‘downside’ in market declines.
In other words, the portfolio is designed to do well in both good times and bad times.
But ‘safe’ can mean more than just downside protection. I think that the fact it can invest in almost anything means that it can future-proof itself and remain economically relevant for much longer than most other ASX shares.
Current investment environment
WHSP has acknowledged in the HY22 result that asset markets are volatile and there’s a lot of uncertainty. So, it’s focused on investments that have “strong defensible cash flows and growing earnings and dividends”.
However, it did say that it’s positioned well for rising rates, inflation and a volatile market environment.
Final thoughts
I think that WHSP is a solid business. I’m not jumping to buy shares at the current WHSP share price, though it could be a decent price for the long-term.
In my opinion, it’s one of the leading ASX dividend shares around. At least for long-term reliability.
