Among the developed nations, Australia holds the world record for the longest period of uninterrupted economic growth. You have to go back to 1993 to find the last recession — a time when few Australians had the internet and when Billy Ray Cyrus was top of the pops.
Given that recessions typically occur every seven years or so, you could say that we are well and truly overdue for a correction. And, given our record levels of household debt, it could be especially nasty when it does finally arrive.
Though I’m not silly enough to call the timing of such things, I am a great believer in a ‘plan for the worst, hope for the best’ investment strategy. You want the kind of investments that tend to offer attractive long-term returns, but are well placed to weather any (inevitable) turbulence along the way.
Here are three stocks that fit the bill.
- IPH Ltd (ASX:IPH) is in the business of intellectual property protections; and is the largest of its kind in Australia. It also has an established and growing presence in Asia — an area that is seeing strong growth in IP protections. With the majority of clients being large off-shore multinationals, IPH has an earnings base that is not reliant on the spend of domestic firms. Moreover, it bills in US dollars — which in the event of any localised recession should appreciate against the Aussie dollar. Importantly, IPH has a rock-solid balance sheet, a good deal of recurring revenue and should be able to sustain a solid dividend over time.
- Bapcor Ltd (ASX:BAP) provides aftermarket parts, service and accessories to the automotive industry. The trade part of the business tends to enjoy very resilient earnings across the cycle — and indeed can even see improved demand when times are tough. That’s because people hang onto their cars for longer and the requirement for parts and servicing increases. Moreover, with customers (mechanics) passing the cost straight through to their own clients, there tends to be a good deal of pricing power. With first-class management and increasing scale advantages, this is definitely one stock worth checking out.
- Altium Limited (ASX:ALU) sells software that helps design printed circuit boards — the twisted mesh of wire and plastic that is at the heart of most electronic devices. The business has minimal exposure to the domestic economy, with the majority of revenues sourced from overseas, and paid for in US dollars. The Internet of Things (IoT) phenomena means the business has a solid wind at its back, and a debt free balance sheet ensures that shareholders (and their dividends) face much less risk than would otherwise be the case.
Aside from being rather robust businesses, all provide their shareholders with attractive and growing dividends. And all are expected to enjoy solid growth in the years ahead.
If you’re looking to strengthen up your portfolio, gain some important offshore exposure and move outside of the crowded top 50 stocks, these stocks could be perfect for you.
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Motley Fool contributor Andrew Page owns shares of Bapcor. The Motley Fool Australia owns shares of Altium, Bapcor, and IPH Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.