Two experts have revealed a couple of ASX shares that could perform strongly if the looming recession hits.
Forager Australian Shares Fund senior analyst Alex Shevelev and founder Steve Johnson gave their picks as part of a podcast posted on Livewire yesterday. The episode focused on how investors could continue to grow their portfolios amid rising interest rates and price increases for essential goods and services.
According to the pair, consumer spending, in general, is anticipated to slow down, with more money being earmarked in people's budgets for paying down existing debt instead of splurging on discretionary items.
So, let's not keep you in suspense. Below we uncover the companies and why these experts think they could insulate portfolios in the current climate.
RPMGlobal Holdings Ltd (ASX: RUL)
RPM provides software to clients in the mining industry. Shevelev stated that its revenues are subscription-based and are unlikely to be affected by the predicted headwinds felt by everyday consumers.
Shevelev said:
RPM is another large investment in the portfolio, software for mining companies. And that has performed very well to date in terms of attracting new subscription revenue to the business. And it feels like that business is not going to stop because of all these macro factors. Yes, commodity prices being dramatically lower would be a hindrance, but the current levels or levels marginally below are sufficient to continue growing. There's a lot more stock specific factors at play here rather than just the overall arching macro themes.
Some of this optimism may be chalked up to RPM expecting record sales growth for FY23 as part of its guidance in its FY22 annual report. If the milestone is reached, it will be the fourth time it has done so over the last four consecutive years.
Readytech Holdings Ltd (ASX: RDY)
Readytech is a software-as-a-service (SaaS) company that provides payroll, human resources, education, and other cloud solutions. Shevelev believes this company will also be shielded from the downside of inflationary pressures and could even benefit from them.
Shevelev said:
[Readytech] will not be facing a consumer who was seeing less money in their pocket. It will be facing an organisation that has reasonably steady revenues, that has a focus on keeping its systems up to date because those systems often help them to save money and be more efficient with their internal processes.
And, in fact, companies like that are now taking advantage and actually increasing their product pricing to their customers because they are seeing some inflationary pressure and they're actually able to pass that through to their customers.
Readytech outlined plans for further expansion into the justice sector in its financial report for FY22, providing further stability to its earnings through blue-chip government contracts.
