The share market has taken a pause this afternoon from the falls, so it might be an idea to think about what shares would be a hedge against the threat of the coronavirus.
There aren’t many shares that you could say are a definite hedge against this type of issue. It isn’t an economic problem it’s a human healthcare problem.
Gold would have been an obvious answer before, but it’s already gone up so much that it could be a trap now considering it’s almost at the early 2010s price, which was the highest ever gold price.
Here are some ASX shares that could be a good hedge against the coronavirus:
Ansell Limited (ASX: ANN)
Ansell produces a wide variety of protective products such as gloves, masks and suits. There is obviously a much higher global demand for these items with the ongoing coronavirus outbreak. Indeed, the public are buying large amounts even though people are being asked not to.
When COVID-19 was just affecting China, Ansell said that it didn’t expect much of a net benefit because of the supply chain disruptions. But now that the outbreak has gone global there could be a sizeable increase in demand from almost every major country.
Ansell also has one of the most reliable dividend histories on the ASX, so it can probably be counted on for income during these times.
Ramsay Health Care Limited (ASX: RHC)
Ramsay is another business on the ASX with one of the best dividend records, it has increased its dividend every year since 2000.
In China previously and now Italy there is news of hospitals being overwhelmed with patients.
Ramsay has large networks of private hospitals in Australia and in Europe. Whilst it’s not certain what a large outbreak would mean for Ramsay, it’s quite clear that there would be a lot of patients requiring medical attention in hospitals, which could be a net benefit for Ramsay.
Despite this potential rise in demand, Ramsay has seen its share price punished just like any other business on the ASX.
Evolution Mining Ltd (ASX: EVN)
Gold miners will not deliver the same type of returns as gold itself, but they do have the option of increasing production when the gold price is high and reducing production when the gold price is low. And Evolution’s share price is lower than it was a couple of years ago.
I think Evolution is one of the best gold miners on the ASX, it has a good balance sheet and it pays a solid dividend.
It has increased its dividend each year over the past few years and currently has a grossed-up dividend yield of 4.3%.
Nine Entertainment Co Holdings Ltd (ASX: NEC)
Nine has been sold off along with the rest of the market. However, with a lot of its business being a news organisation, I’d imagine that this section of the business is getting far more readership than it normally does as the country follows the latest updates about what’s going on with the coronavirus.
Bad news sells, and this is one of the biggest and longest-running news items of the century so far.
Not only does Nine own several quality news services like the AFR, but it also operates Stan. If more people are staying home then they may want to pay for and watch some good value entertainment like the content that Stan provides.
None of these businesses are guaranteed to see their share prices go up, nor are their earnings guaranteed to rise. But I expect all of their profits will do better than the average ASX business. At the current prices I think Ansell makes the most sense because it’s clear that demand for its products are rising.
These 3 stocks could be the next big movers in 2020
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd., Nine Entertainment Co. Holdings 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.
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