2 ASX shares to buy as Aussies tighten their belts

Interest rates have just gone up for the first time in over a decade. What are the businesses that can thrive while Australians lock away their wallets?

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A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation

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After more than 11 years, Australia finally saw interest rates head upwards last week.

The Reserve Bank’s 25 basis-point boost in the cash rate was a rude awakening for an entire generation of consumers and homeowners that have never seen their debt obligations increase.

What does this mean?

The whole point of the RBA’s move is, not just to be a pain for the sake of it, but to stop people spending money in order to bring down inflation.

So if that goal is achieved, which ASX shares will not be anxious about a dramatic plunge in revenue?

One strategy is to back the companies that sell goods and services that Australians just cannot do without, regardless of the economic cycle.

Sequoia Wealth Management advisor Peter Day had a couple of “buy” ideas:

Drinks whether you’re at home or going out

The structure of Endeavour Group Ltd (ASX: EDV) is clever in that it has both a liquor retailing arm and hospitality business.

When people stayed home during the long COVID-19 lockdowns, its retail unit thrived as bored Australians sought to drink at home.

Then as vaccination rates soared and state governments loosened restrictions, its pubs and hotels saw improved business.

Now if Australians put away their wallets after their mortgage repayments rise, they may head back to drinking at home.

For Day, a recent acquisition is also a tailwind.

“Endeavour, in partnership with Warakirri Asset Management, have acquired Josef Chromy Wines in Tasmania for $55 million,” he told The Bull.

“We view the acquisition as a positive step. It’s consistent with our view that Endeavour is seeking margin accretive opportunities.”

Day suspected Josef Chromy would be added to the Pinnacle Drinks unit within Endeavour.

“Growth in Pinnacle brands and hotels are key opportunities underpinning our buy recommendation.”

If two analysts say the same thing, then this must be a buy

You will have shopped in one of Wesfarmers Ltd (ASX: WES)’s retail chains at one time or another: Bunnings, Kmart, Officeworks and Target.

Those stores sell everyday items that Australians will still need, regardless of whether they are taking on additional mortgage costs.

Wesfarmer’s brands make up a “quality retail portfolio”, according to Day. 

“Bunnings remains a solid performer, as people continue to invest in their homes.”

The stock price has been pummelled in recent times, plunging more than 18% so far this year and almost 26% since August.

But this just makes it even more tempting to buy for Day.

“We see the recent share price retreat providing a good entry point for investors,” he said.

“The Wesfarmers management team is highly [regarded] and the balance sheet is healthy.”

Morgans analyst Andrew Tang expressed the same view last week in almost the same words in his Best Ideas memo.

“We see the recent pullback in the share price as a good entry point for longer-term investors,” he said.

“The core Bunnings division remains a solid performer as consumers continue to invest in their homes.”

Tang also nominated Endeavour as one of his current buy recommendations.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. 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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