The Motley Fool

I think these 2 ASX shares are solid defensive ideas

With the Australian economy looking a bit uncertain at the moment, I can understand the desire to find defensive businesses.

Due to the nature of the share market, it’s impossible to find businesses that will never suffer the occasional share price declines, but I do think it’s possible to find businesses that offer different performance potential compared to the general Australian economy or the ASX.

These are two of my favourite ideas:

Magellan Global Trust (ASX: MGG)

This is a high-performing listed investment trust (LIT) which is operated by Magellan Financial Group Ltd (ASX: MFG). The trust invests in the best overseas shares that it can find which generate earnings from the entire world, or at least from the USA.

Magellan Global Trust’s largest holdings include Alphabet, Apple, Facebook, HCA Healthcare, MasterCard, Microsoft, Oracle, Reckitt Benckiser, Starbucks and Visa. Not only are these businesses high-quality, but it’s hard to see any of them disappearing any time soon.

Quite a few of Magellan’s holdings are defensive, but it also holds a decent level of cash. At the end of May 2019 it had 12% of the portfolio as cash. The cash is a great short-term defence against downward market movements. 

The Magellan Trust has outperformed the MSCI World Net Total Return Index (AUD) after fees over the past month, three months, 12 months and since inception. It’s hard to argue with that record. 

It targets a 4% distribution yield, which is solid in this era of lowering interest rates.  

Duxton Water Ltd (ASX: D2O)

Duxton Water owns water entitlements and seeks to benefit from them through both the annual lease income and the long-term growth in value of the water.

Water values have grown significantly over the past couple of years with rainfall being significantly lower than average.

Duxton Water has been busy leasing some of its entitlements so that now 48.5% is leased with a weighted average lease expiry of 3.58 years with a number of irrigators across a number of different industries. The company hopes to increase the proportion of the portfolio under lease to between 55% to 60%.

Over the past 12 months Duxton Water has generated a return of almost 28% which accounts for the change in net asset value (NAV) per share and franked dividends.

The company is steadily growing its dividend, and for the next 12 months potentially offers a grossed-up dividend yield of 5.5%.

Foolish takeaway

I believe both of these businesses are attractive, defensive long-term investment ideas. At the current prices I’d say Magellan could be a slightly better buy due to its global investment mandate. It could be better to buy Duxton Water after a rainy year.

These leading ASX shares could also be great ideas as long-term defensive investments.

3 Top Dividend Ideas For 2019

With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.

Hint: These are 3 shares you’ve probably never come across before.

They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”

We think these 3 shares offer solid growth prospects over the next 12 months. The first two currently offer fat, fully franked yields. The last is a surprising REIT offering you the benefits of being a landlord with none of the hassle! You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."

Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!

The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.

Click here to claim your free copy right now!

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

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.