The Motley Fool

3 defensive ASX shares to buy before a recession

In a recession, there are services which you can’t do without, such as utilities and medical care.

Some cyclical companies could suffer greatly from the effects of a recession, while a defensive one could maintain its profit or even thrive.

I believe that you should never wait for a recession to occur before buying into defensive shares to protect your funds.

Warren Buffett once said:

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”

So if you want to better protect your portfolio, here are 3 defensive ASX shares to own before a recession:

Spark Infrastructure Group (ASX: SKI)

Will this electricity provider stop serving and charging its customers because of a recession? I don’t think so.

Spark Infrastructure is a leading energy network owner and distributor of electricity across New South Wales and Queensland, Victoria and the Australian Capital Territory. It currently owns about $17 billion of energy assets and serves 5.5 million customers.

Spark Infrastructure pays an annual dividend of $0.15, which at its current share price, generates a yield of 6.4%. The only set back is the potential regulatory risk which may restrict its future earnings.

Should a recession occur, I have no doubt that electricity will continue to be delivered to consumers. Likewise, investors will continue to receive a dividend from Spark Infrastructure.

InvoCare Limited (ASX: IVC)

InvoCare is a market leader for funeral services in Australia, New Zealand and Singapore. Despite a lower than expected number of deaths last year, it has continued to grow with acquisitions.

While the funeral home business may not be completely recession-proof, I am certain that a recession will not stop families from giving a proper send-off for their deceased loved ones.

With a price to earnings ratio of 17.63 times, I believe that this undying business could be a good defensive stock addition to your portfolio.

Ramsay Health Care Limited (ASX: RHC)

During a recession, will you avoid going to the hospital for medical treatment? Unlikely.

Ramsay Health Care is one of the largest and well-established private healthcare providers with 480 facilities across 11 countries. A share price target of $60 based on consensus analysts suggests that Ramsay Health Care is fairly valued.

Besides being a defensive business, I think Ramsay Health Care has the potential to grow and expand its services.

Foolish Takeaway

In my view, it is always wise for investors to keep some defensive stocks in their portfolio regardless of the market conditions. In a weak market situation, such as a recession, it’s also a good idea to always have ready cash on hand and be prepared to pounce when buying opportunities arise.

JUST RELEASED: Our Top 3 Dividend Bets for 2019

NEW! The Motley Fool’s team of crack analysts has just released a timely report revealing the names and codes of their top 3 dividend share recommendations for 2019. Be among the first investors to get access—FREE, for a strictly limited time. You’ll discover the names of 3 hefty dividend paying companies with what our analysts consider to be solid growth prospects for the year ahead…

The first two currently offer fat, fully franked yields and the third is a surprising REIT offering you the chance to become a landlord with none of the hassle! If you’re looking for hot new ideas, look no further. But you do need to hurry. Snap up your free copy now, before supplies run out!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our top 3 dividend share recommendations right away.

Motley Fool contributor Ivan Loh has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare Limited and Ramsay Health Care Limited. 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 Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now