Two shares to create lasting family wealth

Creating lasting family wealth that you can pass down through generations requires careful planning and evaluation. There are few companies that last a hundred years. Adapting to changing economic and business cycles and updating business trends require stable management and a progressive approach. Companies must adapt to changes and sometimes even change their core activities as the industry matures. Only those who welcome and adapt to change are the ones who can generate lasting family wealth.

Shares that can create lasting family wealth

Investors fear management changes in a profitable company. They are right to fear, as a change in management can change strategy and execution. Any change takes time to adapt and show results. There are several examples, such as Intel And Applewhich collapsed after a management change. At the same time there are examples such as Bombardier And Advanced micro devices which came back to life after the management change.

The difference between the above companies is that Apple and Intel were profitable companies, while Bombardier and AMD went bankrupt. The new CEOs changed the core strategy. A key lesson from this was that if the strategy is working, it should not be changed.

Constellation software stock

Constellation software (TSX:CSU) Shares have fallen 26% since the sudden departure of founder Mark Leonard in September. Leonard will remain on the board and facilitate the company’s transition to Chief Operating Officer Mark Miller. It is right that investors are afraid of the change. However, Miller clarified that there will be no change in strategy. They will continue to do what they were good at.

Furthermore, Constellation’s robust business model works around the concept of compounding. Every new acquisition brings a new stream of free cash flow. Over the years, this stream has diversified across industries, regions and types of software. During the rise of artificial intelligence (AI), stakeholders were concerned that AI could disrupt licensing software. Mark Leonard held a workshop to address concerns about AI, stating that they are monitoring developments and will take action after the AI ​​impact is clearly defined. This shows Constellation’s hands-on approach to software.

Constellation Software is a good stock to buy and hold as management monitors changing trends. The management change has caused a temporary dip, making the stock cheap from a valuation perspective. The stock is trading at an enterprise value/earnings before interest, taxes, depreciation, and amortization (EBITDA) of 20.3, a level last seen in July 2016. Now is the time to buy this growth stock and reap the benefits of its long-term compounding.

Technology ETF

Another interesting way to generate generational wealth is by investing in the market. The market ETFs that copy the market index automatically review the portfolio for underperformers and replace them with performers.

iShares NASDAQ 100 Index ETF (CAD-hedged) (TSX:XQQ) replicates the Nasdaq 100 index. It has stakes in all the major technology stocks Nvidia Unpleasant Microsoft. The ETF is a one-stop destination to profit from all the technology trends shaping the future, from artificial intelligence to space internet to autonomous cars.

As technology trends drive stocks higher, the ETF benefits as the value of its investments increases. For example, the ETF’s top holdings have moved from FAANG stocks to names like Nvidia and Broadcom who are leading the AI ​​wave.

The ETF moves with the market, diversifies your investments into high-growth stocks and takes an annual management fee of 0.35% of the portfolio value. An average annual return over ten years of 18% is quite good for building generational wealth.