Top broker names 6 defensive ASX shares to buy during the coronavirus pandemic

Goldman Sachs has named Telstra Corporation Ltd (ASX:TLS) and these five ASX shares as the best defensive options right now…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Analysts at Goldman Sachs have revealed that they remain reasonably bearish on Australian equities in the short term.

This is largely over concerns with how quickly economic activity can recover due to the risk of a second wave of coronavirus infections when social distancing measures are relaxed and the impact of both cyclical and structural changes to the economy that the lockdown could have induced.

The latter includes high unemployment, bankruptcies, rising public debt, and significant shifts in consumer and business behaviours.

Though, Goldman Sachs does concede that "Australia continues to look relatively well positioned both in terms of virus suppression and the scale of its fiscal and monetary response."

Nevertheless, the broker believes that investors ought to be looking for defensive options during the crisis and has picked out a few underappreciated favourites.

Which underappreciated defensive shares should you buy?

Six companies with defensive characteristics that Goldman Sachs believes the market is under-appreciating are as follows:

Aurizon Holdings Ltd (ASX: AZJ)

Goldman believes this rail freight operator would be a good option for investors. It notes that Aurizon "offers highly defensive earnings which remain unaffected by Covid-19 and related containment measures." The broker has a buy rating and $5.43 price target on its shares.

Charter Hall Social Infrastructure REIT (ASX: CQE)

The broker is a fan of this REIT in the current market. It points out that "CQE benefits from its defensive, long-term triple net leases with minimal near-term expiries underpinned by childcare operators." It has a buy rating and $3.15 price target on its shares.

Cleanaway Waste Management Ltd (ASX: CWY)

This waste management company is a buy according to Goldman Sachs. It notes that it is "positive on the company's near-term earnings resiliency coupled with attractive long-term industry dynamics." It also points out that the bulk of its earnings come from Municipal waste management (collecting, sorting, and storing waste for local councils). It has a $2.21 price target on Cleanaway's shares.

Freedom Foods Group Ltd (ASX: FNP)

Goldman Sachs likes Freedom Foods for its direct exposure to attractive categories such as infant formula, adult nutritional, immunity, and health. It also notes that plant-based beverages are gaining share from traditional dairy products. Overall, it feels the "current share price is not rewarding the company for its forecast future growth (54% 3-yr EPS CAGR)." The broker has a conviction buy rating and $6.55 price target on its shares.

St Barbara Ltd (ASX: SBM)  

Goldman's favourite option in the gold sector is St Barbara. It has a conviction buy rating and $3.50 price target on the gold miner's shares. It notes that its shares are "trading at a deep discount of 0.6X NAV and still at 0.9X on a bear-case excluding all growth and exploration."

Telstra Corporation Ltd (ASX: TLS)

Finally, telco giant Telstra is rated as a conviction buy with a $4.20 price target. Goldman notes that "in an uncertain macroeconomic environment, we like the defensive and recurring nature of telco earnings, with the sectors' revenues showing limited correlation with consumer household expenditures and GDP growth." It also believes Telstra is well-placed to navigate the crisis from a balance sheet perspective.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Freedom Foods Group 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.

More on Defensive Shares

Men standing together and defending the goal post symbolising defensive shares.
Defensive Shares

4 defensive ASX shares to own in a greedy market: Macquarie

These experts reckon the ASX's record highs won't last...

Read more »

Two mature women learn karate for self defence.
Defensive Shares

2 defensive ASX income shares I think investors should consider buying for bumper returns!

These stocks could offer defence and good returns.

Read more »

Defensive Shares

The pros and cons of buying Telstra shares right now

Is this an opportunity calling?

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Defensive Shares

My 2 favourite ASX utility shares for January 2024

These stocks could provide a good mixture of defence and growth.

Read more »

safe dividend yield represented by a piggy bank wrapped in bubble wrap
Defensive Shares

Weathering market storms: Dividend stocks in Australia as a safe harbour

Defensive earnings could help provide stability.

Read more »

safe dividend yield represented by a piggy bank wrapped in bubble wrap
Defensive Shares

Here's my recommendation for safe ASX shares to buy in December 2023

I think these stocks could be two leading defensive picks.

Read more »

Men standing together and defending the goal post symbolising defensive shares.
Defensive Shares

5 top defensive ASX shares for turbulent times

These stocks could be long-term defensive winners.

Read more »

a child dressed in army fatigues lies on the ground in his backyard wearing leaves and branches on his head as camouflage and peering through a pair of binoculars in a soldier pose.
Defensive Shares

Searching for defensive ASX shares? Here's what I look out for

Not all defensive companies make for good investments.

Read more »