2 deep value defensive ASX 200 shares to buy

Shrewd investors are looking for ASX defensive shares to ride through the coming recession. Shares that make money no matter what happens.

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During the recession of 1991, I developed an interest in defensive shares. A defensive share makes money regardless of what is happening in the economy. They are the infrastructure of our society. Some classic examples are supermarkets, accommodation real estate investment trusts (REITs) and utilities. 

Some of these are obvious. Companies such as Coles Group Ltd (ASX: COL), Woolworths Group Ltd (ASX: WOW) and, say, APA Group (ASX: APA). However, despite the current bear market, all of these companies are still fully valued in my view. Possibly even a bit oversold still. 

Looking deeper though, there are layers of defensive shares that most people don't normally consider straight away. These companies are defensive in nature. They are less exciting than (say) a tech share. In addition, ASX defensive shares often sell at way above reasonable price-to-earnings (P/E) ratios due to predictable earnings. 

ASX defensive share in manufacturing

Austal Limited (ASX: ASB) is a company I have owned for a while. I am very fond of this organisation. It is one of the great turnaround stories and I believe it is one of the world-class companies on the ASX.

Austal manufactures aluminium hulled ships. These ships service two markets in particular. Firstly, the ferry market globally with a particular focus on Asia. In addition, it services the defence industries with the United States defence force as a very solid customer. 

Defence contractors not only survive recessions, they often thrive in them. Austal has a forward order book of $4.9 billion. This gives it something very rare in manufacturers of large equipment; predictability of earnings.

The Austal share price has fallen 38.5% since the start of the year (at the time of writing). Its current P/E ratio is 10.6. I think this is a fair multiple considering the possibility of future growth. Its 10-year average P/E is 15.7.

Feeding the world

The second deep value ASX defensive share is GrainCorp Ltd (ASX: GNC). Companies like GrainCorp are even more defensive than the big supermarkets in my view. People in hard times may stop buying frivolous things like chocolate. But they will always need wheat, barley and edible oils. No matter what.

GrainCorp provides logistics, marketing and shipping for grain producers across Australia. 

Something else that doesn't come up often is the benefit of geography. GrainCorp is a minnow among whales within this sector. However, during the Australian harvest season, all of the northern hemisphere competitors are already spent. 

The GrainCorp share price is down only 10.25% since the start of the year. 

Foolish takeaway

We all know our global economy will spring back to life after the current pandemic. What we don't know is how long that will take, and how deep the recession will be until we are running again. 

When looking for defensive investments to ride out the recession, always look deeper than the obvious candidates. Who manufactures the food? What other industries resist recession? What is the share price and is it a good company? 

Daryl Mather owns shares of Austal Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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