Soul Patts and 2 more ASX stocks Bell Potter says are worth owning

Last week, I published an article in which four Australian equity managers nominated 7 steady ASX compounders for investors to consider.

The response was overwhelmingly positive, but there was one glaring omission that didn't escape readers' attention.

“No mention of Soul Patts (ASX: SOL),” one reader grumbled.

You know what? Fair enough.

We appreciate readers pointing these things out, because sometimes we can do something about it… and sometimes the universe intervenes to right such an injustice of omission!

Shortly after that article was published, Bell Potter released a report titled Time to top up quality, highlighting three ASX companies it believes deserve a place in long-term portfolios.

And yes, one of them is the Livewire fan favourite that is often conspicuously absent from professionally managed Australian equity portfolios.

Dislocations create opportunity

To make his case for Soul Patts and two other companies we'll get to shortly, Bell Potter Portfolio Manager Mark Skocic starts with the rather uninspiring performance of the Australian share market.

“The ASX 200 has been one of the weakest-performing major equity markets in 2026, delivering a low single digit return for the past year,” he says, pointing to the chart below.

“Subdued economic growth prospects, mature industry structures, AI disruption risk and limited exposure to high-growth sectors all contribute to the low growth outlook.”

But beneath the index's lacklustre performance lies a potentially attractive opportunity.

Skocic notes that numerous ASX companies have suffered share price declines exceeding 20%, despite relatively modest changes to their earnings expectations.

In other words, share prices have fallen considerably further than the underlying earnings outlook would suggest.

And as the following chart illustrates, even some of the market's highest-quality businesses haven't been spared.

“Figure 2 highlights the PE derating of high-quality companies in the ASX200 universe, despite still robust EPS (earnings per share) forecasts,” Skocic says.

“Given quality companies typically have growth characteristics with long duration cash flows, the de-rating is largely explained by higher bond pressuring valuations, rather than fundamentals deteriorating.”

The implication is that patient investors may have an opportunity to acquire quality businesses at more attractive valuations, without necessarily compromising on earnings growth or portfolio resilience.

What makes a quality company?

Investors have traditionally divided the market into two broad camps: value stocks, which trade at attractive valuations, and growth stocks, which promise faster earnings expansion.

But quality investing has increasingly emerged as a style in its own right. For Bell Potter, quality companies typically possess five characteristics:

1. Sustainable earnings growth
2. Strong or improving returns on capital
3. Proven management teams
4. Balance sheet strength
5. Favourable industry structures

Applying these criteria, Skocic highlights three ASX companies with compelling long-term investment cases.

“Specifically, Soul Patts and Wesfarmers are proven high-quality capital allocators, providing a solid ballast in a portfolio and, worthy of long-term ownership,” Skocic says.

“Charter Hall, on the other hand, offers compelling value at a point when markets appear to be underappreciating the group’s long term growth potential.”

Here's why each company makes the cut.

1. Wesfarmers (ASX: WES)

One area where Bell Potter sees opportunity is consumer discretionary stocks, which have struggled against a backdrop of weak consumer confidence and persistent cost-of-living pressures.

But today's consumer pain could eventually become tomorrow's investor gain.

“... historical evidence suggests that Australian consumer discretionary stocks tend to bottom before the final RBA rate hike as equity markets begin pricing a recovery ahead of the economic data,” Skocic says.

“Further, periods of peak pessimism (like now) with multi-decade lows in consumer sentiment, often proven attractive entry points into high-quality retailers.”

Against this backdrop, Bell Potter highlights Wesfarmers, describing the conglomerate as “one of Australia's highest-quality listed companies, owning a portfolio of market-leading businesses across retail, industrials and healthcare”.

While its share price can be considerably more volatile than its underlying earnings, the broker argues that Wesfarmers' appeal extends well beyond the familiar names of Bunnings and Kmart.

The real attraction is management's long-standing ability to allocate capital effectively, investing in new growth opportunities while maintaining financial discipline.

“WES’s strong balance sheet and substantial cash generation provide the flexibility to invest through the cycle. Management has consistently demonstrated a willingness to recycle capital when opportunities arise, deploying funds into organic growth initiatives, acquisitions and new business platforms while maintaining attractive shareholder returns,” Skocic says.

Importantly, investors aren't necessarily being asked to pay a premium for these qualities - Bell Potter notes that Wesfarmers trades below its five-year average earnings multiple and offers a dividend yield of approximately 3.4%, fully franked.

For investors prepared to look beyond near-term consumer weakness, the broker sees an opportunity to own a proven compounder at a more reasonable price.

The new Market Index Stock Scores reinforce Bell Potter's thesis, awarding Wesfarmers an 'A' rating, with quality its standout metric. The company delivers exceptional returns on equity, assets and invested capital compared with its peers and the broader market.

2. Charter Hall (ASX: CHC)

If consumer discretionary stocks have had a difficult year, listed property has arguably had it worse.

Bell Potter notes that real estate investment trusts (REITs) have been the ASX's second-worst-performing sector year-to-date, behind information technology. Yet the underlying fundamentals haven't deteriorated nearly as much as share prices might suggest.

FY26 results broadly met expectations, while recent property transactions have supported asset valuations. Instead, rising bond yields appear to be the primary culprit behind the sector's weakness.

As a result, listed property securities are trading at a discount of close to 20% to net tangible assets (NTA).

Historically, REITs have tended to recover when investors shift their attention from how high interest rates are to where rates are heading next. That transition can occur around the peak of a tightening cycle, rather than after rates actually begin falling.

To position for an eventual recovery, Bell Potter has initiated a position in Charter Hall, funding the purchase by trimming its holding in Dalrymple Bay Infrastructure (ASX: DBI).

But Charter Hall isn't your typical listed property company.

The group oversees approximately $94 billion across 40 listed and unlisted funds, spanning office, industrial, retail and social infrastructure assets.

“Unlike traditional REITs, CHC's earnings are mainly driven by managing capital on behalf of institutional investors, creating an asset-light and scalable growth platform,” Skocic says.

Bell Potter also points to management's disciplined approach to capital allocation and balance sheet management across multiple property cycles.

“High teens [return on equity] and low teens gearing ratio attest to the financial strength of the company,” Skocic says.

Charter Hall has also delivered average annual dividend growth of approximately 6%, supported by a strong record of long-term earnings expansion.

Based on forecast FY27 earnings per share of $1.14, Charter Hall trades on approximately 16 times earnings - below the broader ASX 200, despite offering superior forecast EPS growth.

Market Index's Stock Scores also award Charter Hall an 'A' grade, with quality emerging as its strongest metric.

3. Soul Patts (ASX: SOL)

Unlike Wesfarmers and Charter Hall, Soul Patts isn't a beaten-down stock waiting for investors to rediscover its merits. In fact, its shares have climbed more than 20% this year.

But Bell Potter believes the company's appeal lies less in its near-term valuation and more in its ability to keep compounding wealth over decades.

I recently covered CEO Todd Barlow's masterclass in how Soul Patts has transformed itself from a relatively concentrated investment company into a diversified investment powerhouse.

Education

5 investing lessons from Soul Patts CEO Todd Barlow - and the result that followed

View

Over the years, the group has reduced its reliance on listed equities and individual investments, expanding into private markets, real assets and, more recently, fixed income.

The objective has been to build a portfolio capable of generating attractive returns across different market environments, while reducing dependence on any single asset class.

That disciplined approach to capital allocation, combined with a relentless focus on cash generation, has helped Soul Patts increase its annual dividend for 28 consecutive financial years.

And it's precisely this combination of capital preservation, income and long-term growth that appeals to Bell Potter.

“A key attraction of SOL is its ability to protect capital during weaker markets while continuing to generate attractive long-term growth,” Skocic notes.

“Significant undistributed franking credits, a growing income stream and a focus on long-term compounding support a strong shareholder return profile and make SOL an attractive blend of income and growth.”

Of course, quality rarely comes cheap. Market Index's Stock Scores give SOL a near-perfect overall rating, but there's no such thing as a free lunch, with the stock trading above its estimated fair value.

Soul Patts trades at a mid-teens premium to its net tangible assets, but Bell Potter argues that this reflects the company's demonstrated ability to grow net asset value per share faster than the broader ASX 200.

For investors seeking a business they can own through multiple market cycles, the broker believes Soul Patts' capital allocation track record justifies that premium. 

And for the Livewire readers who felt it deserved a place among Australia's great compounders, it seems Bell Potter agrees.