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3 defensive ASX shares to watch amid global economic slowdown

The fears of a global economic slowdown are increasingly becoming a likely reality. According to the Australian Bureau of Statistics (ABS), the economy grew by only 0.2% in the last quarter. This wraps year on year growth to 2.3%, below the 2.5% level expected.

Overseas, the British economy plunged into reverse with gross domestic product contracting by 0.4% from the previous month. For 2018 as a whole, GDP growth slipped to its lowest since 2012, at 1.4%, down from 1.8% in 2017.

Here are three defensive stocks, that aren’t your generic Sydney Airport Holdings Pty Ltd (ASX: SYD) or Transurban Group (ASX: TCL), to help investors weather the storm.

Cleanaway Waste Management Ltd (ASX: CWY)

Cleanaway is a high growth, defensive play within the waste management sector. The Cleanaway share price soared well over 20% in the past month to all-time highs on the back of a strong half-year result. The announcement highlighted:

  • Underlying net revenue up 47.4% to $1,064.6 million
  • Net profit after tax up 52.6% to $67 million
  • Earnings per share up 26.8% to 3.3 cents

Cleanaway is arguably an oligopoly within the waste management space and continues to benefit from its acquisition of Toxfree solutions.

The company trades at a P/E of 32x FY18 figures which is relatively cheap given the company’s compound annual growth rate (CAGR) of 6.3% for net revenue, 28.9% for net profit and 23.7% for earnings per share (EPS) across the last four years.

The defensive nature of waste management and Cleanaway’s ability to deliver consistent growth makes it a worthy company to put on your watchlist.

Tassal Group Limited (ASX: TGR)

The Tassal Group share price spiked almost 10% on the day the company released its half-year results. Like Cleanaway, Tassal is a quality company that operates within the salmon industry. In recent years, Tassal has also diversified its portfolio to include prawn farming and De Costi, a seafood business. The company reported the following in its half-year report:

  • Revenue up 24.8% to $326 million
  • Operating net profit up 22.3% to $31.72 million
  • Operating cash flow up 96.3% to $79.65 million

Tassal is in a strong position to continue delivering long term shareholder value with diversified operations across salmon and prawns. CEO Mark Ryan stated that “growing consumer demand for nutritional food has seen salmon demand outpace supply growth in Australia and overseas”.

Scentre Group (ASX: SCG)

With the RBA staying ‘positive’ but open to rate cuts and the US Federal Reserve’s pause on interest rate hikes, it could be an opportune time to pick up some REITs.

A research note out of Goldman Sachs revealed that its analysts have placed a ‘buy’ rating on Scentre Group with a price target of $4.71. This represents an almost 20% upside to the Scentre share price today.

Goldman believes that the market has misjudged the company’s valuation relative to its peers such as GPT Group (ASX: GPT) and Dexus Property Group (ASX: DXS).

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited and Transurban Group. The Motley Fool Australia has recommended Scentre Group. 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.

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