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4 shares I’d buy to protect against the coronavirus

The coronavirus continues to spread in China and in other countries with South Korea, Italy and Iran seeing growing numbers of confirmed cases.

If numbers keep rising then there’s a chance it could become a global coronavirus crisis (GCC), which is my own silly made-up term for it. Markets tend to overreact to both negative and positive news. Hopefully through luck and/or co-ordinated efforts the spread can be halted in the countries where it’s prominent.

But we’re already seeing some ASX shares are experiencing or predicting supply and demand problems due to the effects in China. Apple, WiseTech Global Ltd (ASX: WTC), Altium Limited (ASX: ALU) and Cochlear Limited (ASX: COH) are just some of the names already affected.

Here are some share ideas which may be less affected, or may even see more demand:

TPG Telecom Ltd (ASX: TPM) 

It’s in situations like this that utilities would show their defensive capabilities. Coronavirus or not, everyone still needs internet. Indeed, if people were to spend more time indoors then the internet would be particularly important for entertainment and information.

TPG receives its monthly payment from customers, so its cashflow and profit would probably be less affected than most other Australian businesses on the ASX.

The recent merger appeal win for TPG and Vodafone Australia means TPG has a promising future with synergies and the expansion into 5G. The leadership also expect that dividend payments can be larger for shareholders.

Coles Group Limited (ASX: COL) 

We always need food. If people are avoiding restaurants and cafes then supermarkets could see even larger regular demand for their food, plus the stocking-up effect.

There is an investment choice between Coles and Woolworths, so I went for Coles on valuation grounds. Coles is trading at 24x FY20’s estimated earnings whereas Woolworths is trading at almost 30x FY20’s estimated earnings.

Coles has a strategy to try to get back on the front foot against Woolworths based on being more sustainable and having more quality private label products. It could appeal to customers and win them back.  

Ansell Limited (ASX: ANN) 

Gloves, face masks and protective suits are products that Ansell produces and they are in high demand due to the coronavirus.

There may be a bit of a logistical problem in actually getting those products where they need to go, but Ansell has already said it doesn’t expect a negative from the coronavirus in China.

Ansell sells its products around the world, so it’s well placed to benefit from increased global demand.

InvoCare Limited (ASX: IVC) 

The funeral service sector is a defensive industry in the best of times, so it’s an option to defend against recession. If there were to be a sustained coronavirus outbreak in Australia and New Zealand then, morbidly, InvoCare might be a beneficiary with its various brands and high market share.

However, I truly hope that demand for InvoCare’s services sticks close to the long-term projections by the ABS. Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050.

Foolish takeaway

All four of these shares offer attributes that are defensive for different reasons. Ansell would probably be my guess as to which share would see the biggest growth, it would be quite easy to imagine that demand from the public for protective equipment could increase by a large percentage.  

Other shares to consider as defensive investments during the coronavirus are these top ASX stocks

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As of 13/2/20

Tristan Harrison owns shares of Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of Altium and WiseTech Global. The Motley Fool Australia has recommended Ansell Ltd., Cochlear Ltd., and InvoCare 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.

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