MENU

3 ASX shares I would own to protect against an Australian recession

Some people seem to think that an Australian recession is getting a bit closer, particularly with how Australia’s property prices continue to decline.

If that’s the case then it’s hard to say what the effect would be for domestic ASX businesses like Commonwealth Bank of Australia (ASX: CBA) and Wesfarmers Ltd (ASX: WES).

I think the below three ASX shares could be good to own during an Australian recession due to their international exposure and little Australian exposure:

Magellan Global Trust (ASX: MGG)

This is a listed investment trust (LIT) which is operated by the high-performing global fund manager Magellan Financial Group Ltd (ASX: MFG).

The LIT aims to invest in the highest-quality businesses in the world whilst also providing a high level of protection with its defensive positions, including cash. Magellan’s biggest positions at the end of March 2019 were: 17% cash, Alphabet & Facebook each with allocations above 7% and Starbucks & Apple each with allocations above 6%.

Over the past year it has delivered a net return (after fees) of 15.7% and it is valued at a slight discount to its underlying assets.

WAM Global Limited (ASX: WGB)

WAM Global is the listed investment company (LIC) in the Wilson Asset Management (WAM) stable that invests in small and medium sized international businesses.

The global definition of small is quite different to the ASX meaning. The ASX is based in a country with a small population, whereas global shares could be ones that are focused on the large US economy or the entire global economy.

WAM Global had 17.6% of its portfolio in cash at the end of last month. Some of its biggest holdings at the end of March 2019 were: Alphabet, American Express, Danone, Diageo, HCA Healthcare, Logitech and Reckitt Benckiser.

It’s currently trading at a 12% discount to its last stated pre-tax net tangible assets (NTA) per share.

iShares S&P 500 ETF (ASX: IVV)

One of the simplest ways to diversify your investments overseas could be with one of the best exchange-traded funds (ETFs) in the world.

The S&P 500 index includes many of the best businesses that are listed in the US. Its top holdings include Microsoft, Apple, Amazon, Facebook and Berkshire Hathaway.

This ETF has an extremely low management fee of 0.04% per annum. I’d happily own this ETF as my only holding if I had to.

Foolish takeaway

Each of the above ASX shares generate most of their underlying earnings from outside of Australia and could be good ideas to protect against an Australian recession. At the current prices, I prefer the idea of WAM Global because of its sizeable valuation discount.

Another way to protect against an Australian recession is to invest in very defensive ASX shares like these ones.

Our Best 3 Dividend Shares for 2019 – NOW AVAILABLE!

Want to earn even more FULLY FRANKED DIVIDENDS in 2019? Get yourself in gear now with The Motley Fool’s valuable new report, 3 Top Dividend Shares for 2019... now available for FREE!

Discover 2 fully vetted companies paying fat, fully franked dividends. Plus a REIT that could set you up for a stream of rental income for years to come, without any of the hassles of being a landlord. These are our experts favourite bets for your investment cash today.

To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!

Simply CLICK HERE FOR YOUR FREE REPORT!

Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS and WAMGLOBAL FPO. The Motley Fool Australia owns shares of and has recommended Wesfarmers 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