Defensive Stocks That Perform Throughout

[Lewylewylewy]

Hi all,

I think there's potential (probable) for a short-medium term dip around the corner (if we're not already in it!).

Recently I've been thinking that it would be nice to be less involved with my investments to simulate using shares as a retirement option. So I've been thinking about what I could have in my retirement portfolio that would constitute as a defensive stock that could perform equally in both good and bad times.

My thinking brought me to the idea of the healthcare industry and the food industry. Here's my list of defensive stocks, with the reasons why I think they're defensive (in order of most defensive):

1. VHP (Healthcare based, which is something people always need and demand goes up in hard times. Average contracts of about 18 years on property supported by healthcare)
2. GXH (Doctors and pharmacies. Always needed, government supports service costs. Doctors can feed pharmacy business by placing pharmacies next to doctor complexes. Resistant to change unless there are some MAJOR policy changes in govt)
3. EBO (Healthcare - pharmacies and ancillary services. Less defensive than GXH because part of the business is animal healthcare, but likely to have more growth as they're real wheelers and dealers :) )

The above three really stand out strongly above the rest, in my (current) opinion. The following, I class as semi-defensive:

- SCL (Food, wheeler and dealers. Have survival in their historical story. Suffer when NZD increases in value, but can be defensive when combined with a company that relies on a high NZD. Much of the value is in the NTA. If they were a wheat producer, I would have classed them in the above list, but I think apples are something that people can choose to forgo in bad times)
- SEK (As above)
- SUM (Providing they don't become too highly leveraged, they could be very defensive [which is partly why they're not on the above list]. Their customers typically set up their finances such that they have low risk investments and don't rely on incomes that could be lost. The only drop they would have would be a drop in expansion revenue and share price attributed to this speculation - both of which should recover. Other retirement villages fall into the same category, SUM is simply my favourite flavour of village. Arguably ARV may be considered more defensive. Much of the value is in the NTA)
- AIA (It's an Airport servicing the largest city in the country. In bad times it will suffer, but when things come right, I can't see it losing any value / position. Much of the value is in the NTA)
- POT (As above, but a port.)

I considered adding REITs to this list, but decided against it as, in that game, you make good money by being highly leveraged, which is exactly what you don't need in bad times.

I also thought about companies that rely on income from businesses abroad, to cover a localized (NZ) crash. Unfortunately I couldn't think of anything that I saw as low risk, other than perhaps FPH (which I didn't include because it operates in a competitive environment) or ASX:RHC (which I didn't include because it's not in the NZX).

[King1212]

I agreed ARV is very defensive alright...TJ can support that. I saw ARV during feb chaos and brexit..It was only down couple cents the recovered.....

[skid]

I think you would really need to go back and see if any performed through the GFC.
My gut feeling is that is may be impossible for any share to really perform in that kind of environment--It may be necessary to switch to capital preservation rather than performance.
If its just a mild downturn some should still perform though.

[kiora]

Hi all,

I think there's potential (probable) for a short-medium term dip around the corner (if we're not already in it!).

Recently I've been thinking that it would be nice to be less involved with my investments to simulate using shares as a retirement option. So I've been thinking about what I could have in my retirement portfolio that would constitute as a defensive stock that could perform equally in both good and bad times.

My thinking brought me to the idea of the healthcare industry and the food industry. Here's my list of defensive stocks, with the reasons why I think they're defensive (in order of most defensive):

1. VHP (Healthcare based, which is something people always need and demand goes up in hard times. Average contracts of about 18 years on property supported by healthcare)
2. GXH (Doctors and pharmacies. Always needed, government supports service costs. Doctors can feed pharmacy business by placing pharmacies next to doctor complexes. Resistant to change unless there are some MAJOR policy changes in govt)
3. EBO (Healthcare - pharmacies and ancillary services. Less defensive than GXH because part of the business is animal healthcare, but likely to have more growth as they're real wheelers and dealers :) )

The above three really stand out strongly above the rest, in my (current) opinion. The following, I class as semi-defensive:

- SCL (Food, wheeler and dealers. Have survival in their historical story. Suffer when NZD increases in value, but can be defensive when combined with a company that relies on a high NZD. Much of the value is in the NTA. If they were a wheat producer, I would have classed them in the above list, but I think apples are something that people can choose to forgo in bad times)
- SEK (As above)
- SUM (Providing they don't become too highly leveraged, they could be very defensive [which is partly why they're not on the above list]. Their customers typically set up their finances such that they have low risk investments and don't rely on incomes that could be lost. The only drop they would have would be a drop in expansion revenue and share price attributed to this speculation - both of which should recover. Other retirement villages fall into the same category, SUM is simply my favourite flavour of village. Arguably ARV may be considered more defensive. Much of the value is in the NTA)
- AIA (It's an Airport servicing the largest city in the country. In bad times it will suffer, but when things come right, I can't see it losing any value / position. Much of the value is in the NTA)
- POT (As above, but a port.)

I considered adding REITs to this list, but decided against it as, in that game, you make good money by being highly leveraged, which is exactly what you don't need in bad times.

I also thought about companies that rely on income from businesses abroad, to cover a localized (NZ) crash. Unfortunately I couldn't think of anything that I saw as low risk, other than perhaps FPH (which I didn't include because it operates in a competitive environment) or ASX:RHC (which I didn't include because it's not in the NZX).

Share prices don't necessarily follow earnings ;)

[James108]

SEK and SCL are both commodity stocks.. doesnt sound defensive to me.

[Valuegrowth]

Unlike those days, it is wise to keep some attractive defensive stocks in anybody’s portfolio. Globally, some defensive stocks have outperformed broader market in all types of market situation.

[Valuegrowth]

October is month of volatility as well. It creates great opportunity for intelligent investors. We are seeing some demand for defensive stocks such as food stocks in global markets. They are bucking the market trend.

[percy]

I think you would really need to go back and see if any performed through the GFC.
My gut feeling is that is may be impossible for any share to really perform in that kind of environment--It may be necessary to switch to capital preservation rather than performance.
If its just a mild downturn some should still perform though.

From memory all stocks suffered during GFC.
Those who carried a lot of debt were the worst affected ie NPX.
Those who increased their dividends were the first to recover.ie POT.
So I try to look for companies that do not carry a lot of debt,have strong cash flow,have increasing eps and dividends.
NB.Acceptable levels of debt will vary from sector to sector,ie a bank will have a lot higher debt than a retailer.A bank's business is money,while caution is required with retailers, as they have ongoing large debt via store leases,some with some years to run.

[Stranger_Danger]

In this topsy turvy world of manipulated interest rates, I would be *really* careful about considering any stock defensive.

In a lot of ways, the low growth, large cap, dividend yielding "bond alternatives" could actually be where lots of risk is hiding.

Meridian - which is a top notch operator, in which I still hold all my shares - recently went (from memory) from 3.07 to 2.59 in absolutely no time, went ex a dividend and has recovered some to 2.75. That doesn't sound very defensive to me!

When you look at the P/E and the percentage of earnings paid out, you start to see that while Meridian has been and is a good investment, especially when compared to the artificially low risk free return rate, defensive or "safe" it is not!

The truth is, nobody knows exactly how the race to the bottom re interest rates will end, but what I do know is when you make money almost free, then everything is bought and risk is everywhere.

For what it is worth, I keep an "idiot index" where, having identified someone as a moron, I stay close enough to see what they're doing with their investments. To a man, they're buying houses, borrowing against existing houses to buy consumer assets, getting interested in shares having sold at the bottom in 2009 etc etc etc. They fear nothing and are acting on the basis of low interest rates *until the end of time*, with more than one actually predicting that to me.

The idiot index is flashing very red indeed!

[percy]

Don't know whether this is of interest to anyone,but I have been told a lot of Chinese are getting divorced.
Appears a couple can only own two houses,but once divorced each partner can own two.
And so they can then live together happy ever, after owning four houses.

[silu]

I always saw and have invested in IFT Infratil as a defensive stock option. Returns are never stellar but the yield is good, their portfolio is relatively diverse and has a good track record of good management.

[Beagle]

I would have thought Tegal as a consumer staple would have been more defensive but recent market evidence would suggest otherwise both on the share market itself with the SP and also the apparent recent glut in chicken suggesting its a cyclical commodity not dissimilar to many other cyclical commodities. Maybe the end user RBD is a better defensive stock. People eat cheap takeaways in good times and bad and more people substitute cheap takeaways for more expensive dining options in bad times don't they ?

[macduffy]

In bigger, deeper markets than ours it is possible to run a scan of stocks that have performed consistently well over an extended period of time and through good and bad market conditions. Something like x years of higher eps; y years of higher dividends etc. If such stocks can be found, I'd call them defensive. Other than that, I'm with Stranger Danger in exercising caution in the use of this term.

[Lewylewylewy]

for me the chicken industry pricing is too close to the bone to be considered safe.

[stevevai1983]

Don't know whether this is of interest to anyone,but I have been told a lot of Chinese are getting divorced.
Appears a couple can only own two houses,but once divorced each partner can own two.
And so they can then live together happy ever, after owning four houses.

it's true.. very ironic

[Stranger_Danger]

I would have thought Tegal as a consumer staple would have been more defensive but recent market evidence would suggest otherwise both on the share market itself with the SP and also the apparent recent glut in chicken suggesting its a cyclical commodity not dissimilar to many other cyclical commodities. Maybe the end user RBD is a better defensive stock. People eat cheap takeaways in good times and bad and more people substitute cheap takeaways for more expensive dining options in bad times don't they ?

I'm having a good look at Tegal currently. I've already decided that it isn't the next Dick Smiths, despite my general negativity towards PE floats. The reduction in chicken prices is a positive for me (I like buying cyclicals at low rather than high points of industry cycles), and I totally get Winner's comments about the incentives for the PE firm if the company performs early on.

All up though, I reckon the next earnings release will be soft, and because of people's PE paranoia, if this happens, it may sell off too far. This is the point I'd want to enter, but, I do not think Tegel is the next Dick Smiths waiting to happen.

[percy]

I'm having a good look at Tegal currently. I've already decided that it isn't the next Dick Smiths, despite my general negativity towards PE floats. The reduction in chicken prices is a positive for me (I like buying cyclicals at low rather than high points of industry cycles), and I totally get Winner's comments about the incentives for the PE firm if the company performs early on.

All up though, I reckon the next earnings release will be soft, and because of people's PE paranoia, if this happens, it may sell off too far. This is the point I'd want to enter, but, I do not think Tegel is the next Dick Smiths waiting to happen.

Sage advice and commentary,as always.

[h2so4]

Don't know whether this is of interest to anyone,but I have been told a lot of Chinese are getting divorced.
Appears a couple can only own two houses,but once divorced each partner can own two.
And so they can then live together happy ever, after owning four houses.

How does that work?
Here you get divorced and if your lucky you get half a house. Still live happily everafter. Lol!

[percy]

How does that work?
Here you get divorced and if your lucky you get half a house. Still live happily everafter. Lol!

I am not going there.!!!..lol.

[Valuegrowth]

By staying with strong defensive stocks we could still become winners. On Friday McDonald's Corp. (MCD) gained nearly 3% after the fast-food giant reported better than expected earnings.

[GTM 3442]

I would have a closer look at Visa and MasterCard.

Effectively, they're utilities/infrastructure for global payments. Like an electricity lines company, but for money.

[Valuegrowth]

During next couple of months some global defensive stocks should have great demand due to much improved business in their industry. I am looking for some opportunities in Food and utility sectors as well.

[Valuegrowth]

Defensive stocks should have more demand during period of uncertainty.

[Beagle]

My favourite defensive stock now has a ticker code of CASH

[Bobdn]

Oil is better

[Onion]

Better than CASH is CASHA. On the NZX CASHA (https://www.anzsecurities.co.nz/DirectTrade/dynamic/quote.aspx?qqsc=CASHA&qqe=NZSE) is up 1.1% today. :cool:

[Valuegrowth]

There will be great winners in global markets in the coming days as well.

If we have answer to the following question, then we are through.

How to stay with winning stocks or assets in good time and bad time?

.

Better than CASH is CASHA. On the NZX CASHA (https://www.anzsecurities.co.nz/DirectTrade/dynamic/quote.aspx?qqsc=CASHA&qqe=NZSE) is up 1.1% today. :cool:

[Valuegrowth]

There are sell-off in oil and Grain as well.

.

Oil is better

[Joshuatree]

Better than CASH is CASHA. On the NZX CASHA (https://www.anzsecurities.co.nz/DirectTrade/dynamic/quote.aspx?qqsc=CASHA&qqe=NZSE) is up 1.1% today. :cool:

"Deeply Subordinated notes" eh like a trumpophiliac?

[Bobdn]

Initially oil will be sold.off. But Oil will do a lot better under Trump than Clinton. Oil is a good bet under a Trump presidency.

[Bobdn]

And by Oil I mean owning oil companies. They may be finally free of the cruel and unusual regulation that haunt them at the moment.

[Valuegrowth]

And by Oil I mean owning oil companies. They may be finally free of the cruel and unusual regulation that haunt them at the moment.
U.S.energy sector should get boost.According to the U.S. energy industry, Trump’s expected pro oil and gas industry policies mean that U.S. "production of oil and gas could recover at a faster rate in 2017.More oil and gas output means lower oil and gas prices.

Infrastructure is another sector which should get some development. Consumer staples especially food companies also should do well.

[Valuegrowth]

Defensive type of stocks mainly consumer staples have underperformed the market during last two years but there were great winners including multibaggers such as A2 Milk Company Ltd(NZ) in New Zealand and Nestle Pakistan,Cairo Poultry Co SAE (POUL.CA) SAFM, Tyson Foods, and Resources Bhd(Malaysia) etc globally.

https://seekingalpha.com/article/4164783-consumer-staples-time-buy

Consumer Staples: It's Time To Buy

[janner]

Defensive type of stocks mainly consumer staples have underperformed the market during last two years but there were great winners including multibaggers such as A2 Milk Company Ltd(NZ) in New Zealand and Nestle Pakistan,Cairo Poultry Co SAE (POUL.CA) SAFM, Tyson Foods, and Resources Bhd(Malaysia) etc globally.

https://seekingalpha.com/article/4164783-consumer-staples-time-buy

Consumer Staples: It's Time To Buy

Name them for the NZ market please ..

[Valuegrowth]

Name them for the NZ market please ..

Janner: Currently, I am doing some studies on the following companies which I found under the thread of Convita. I would like to add some Australian companies as well.

Companies included in the S&P/NZX Primary Sector Index are:

• The a2 Milk Company Limited
• Comvita Limited
• Delegat Group Limited
• Foley Family Wines Limited
• Fonterra Shareholder’ Fund
• Livestock Improvement Corporation Limited (NS)
• New Zealand King Salmon Investments Limited
• PGG Wrightson Limited
• Sanford Limited (NS)
• Scales Corporation Limited
• SeaDragon Limited
• Seeka Limited
• Synlait Milk Limited (NS)
• T&G Global Limited
• Tegel Group Holdings Limited

I like to find out answers to the following questions? Ogg already provided some answers as highlighted below on Convita. Out of above 15, I would like to find out solid companies(less than five because I prefer few golden eggs) because I have made some mistakes in this market. I expect kind of market correction by 2019. It could be even bear market.

Does the company have a long term business?

Yes.

Is the company building cash while managing debt level prudently?

No.

Will the company stand out from the rest while facing competition successfully if they have competition?

They don't have competition (lol, OK maybe just a little, but answer still yes)

Does the company have products with sufficient market potential to sustain sales for at least several years?

Yes.

Does the management have a strategy and determination to develop products and services?

Don't know.

What is the company doing to maintain profit margin?

Praying to the weather Gods.

Can we be satisfy with their research and development, cost analysis and accounting controls?

Some what satisfied but could be better.

Does the company have above average marketing organization?

Leading brand in it's category.

Does the company reduce or increase marketing and research cost?

I guess it's increasing.

I will pay attention to the following as well.

A great company is not a great investment if you pay too much for the stock.

The great successes of life are made by concentration." As Graham points out, "the really big fortunes from common stock" have been made by people whp packed all their money into one investment they knew supremely well.

[troyvdh]

I appreciate the discussion...re defensive stocks..has any of the aforementioned entities returned a return of 9 percent pa for the past 25 years.