Sure things: Death, rubber and pipelines
By Mike King - July 16, 2012
With so much gloom and doom pervading our markets, investors are either selling out of shares or looking for those companies that are unlikely to end up at death’s door, should a bear market take hold.
For the year to date, the broader S&P / ASX 200 Index (INDEX: ^AXJO) (ASX: XJO) is up 0.6%, but several sectors have handily outperformed it. These sectors are Healthcare, Property (A-REIT), Telcos, Utilities, Consumer staples. For the year-to-date, Telcos are up 15.7%, Healthcare is up 15.3%, Property up 14.0%, Utilities up 7.5% and Consumer Staples up 6.3%. These sectors also tend to outperform during a down market.
Occasionally, you may find some companies outside these sectors as well that have shown an ability to shrug off global worries. Here’s three stocks that you may be interested in.
Invocare Limited (ASX: IVC) provides funeral services, owns crematoriums and cemeteries, and is the leading funeral services provider in Australia and New Zealand. The company is also increasingly becoming a fund manager. What! you ask? Well, Invocare is increasing the types of services it provides, including taking prepayments for coffins, caskets, funerals and burial plots. For the 2012 half year, the company had $308m on its balance sheet of prepaid funds, on which the company earns income.
As the company is reliant on death for its profits, a growing population is good for the company and revenues and profits should grow in line with the death rate. Invocare has never been cheap and always trades at a premium P/E ratio to the market average. The stock is currently trading on a prospective P/E ratio of 18.6, compared to its historical average of around 20-22. The dividend yield is currently 3.8% fully franked, and is likely to stay around that level.
Invocare is barely affected by ongoing global economic uncertainty, in fact, investors constant worrying might even be good for its business!
Ansell Limited (ASX: ANN) designs, develops, manufactures and markets a wide range of surgical, examination, industrial and household gloves, protective clothing and condoms. The company is trading on a forecast P/E ratio of 13.2 and a fairly low dividend yield of under 3%. Although the company pays out around 36% of its earnings as dividends, so it could increase the dividend payout comfortably, without over-stretching itself.
Ansell’s products are essential for many sectors, hence its resilience to global market movements. As the company considers the US dollar its operating currency, a high AUD/USD exchange rate can hinder its reported profits. A lower Australian dollar would certainly benefit Ansell. Debt has increased slightly in the last six months, due to acquisitions, but certainly does not look out of control. Could be one for the watchlist.
APA Group (ASX: APA) owns and operates around $9 billion in energy infrastructure assets and owns over 10,000 kms of gas pipelines. Australian gas consumption is forecast to almost double between now and 2030, with gas fired electricity a key driver of that growth. The company is also expanding into alternative energy sources, with its recent acquisition of Emu Downs wind farm in Western Australia, and has investments in a number of listed and unlisted companies including 21% in Hasting Diversified Utilities Fund (ASX: HDF) and 6% in Ethane Pipeline Income Fund (ASX: EPX).
With a large chunk of debt and a complex company structure, APA may end up at death’s door. But if the company is right and gas consumption doubles, APA looks perfectly positioned to take advantage of that.
Should a full-on bear market develop, the stocks above could be more resilient to falling revenues and profits affecting the rest of the market. Should the market throw these stocks out with the rest purely on suspicion, the stocks above may be worthy of further research.
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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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With so much gloom and doom pervading our markets, investors are either selling out of shares or looking for those companies that are unlikely to end up at death?s door, should a bear market take hold.
For the year to date, the broader S&P / ASX 200 Index (INDEX: ^AXJO) (ASX: XJO) is up 0.6%, but several sectors have handily outperformed it. These sectors are Healthcare, Property (A-REIT), Telcos, Utilities, Consumer staples. For the year-to-date, Telcos are up 15.7%, Healthcare is up 15.3%, Property up 14.0%, Utilities up 7.5% and Consumer Staples up 6.3%. These sectors also tend to outperform during a…