If I were trying to build a defensive ASX share portfolio, there are a few names that come to mind. In this article, I'm going to write about five of them.
Just because a business is defensive doesn't mean that its share price won't fall. But, profit may be resilient and that could mean less of a fall during a downturn.
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Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Pattinson is an investment house that is invested in an array of assets that can provide resilient cash flow and provide returns that don't match the economy. It has exposure to areas like telecommunications, resources, swimming schools, agriculture, property and so on.
The business often likes to point out that the Soul Pattinson share price typically falls less in a downturn than the wider share market.
As a useful bonus, the company has grown its dividend every year since 2000, providing investors with helpful cash flow.
Telstra Group Ltd (ASX: TLS)
Telstra seems to be the leading telco in Australia, particularly after the recent Optus outage problems.
I'd guess most individuals and businesses would say that their internet connection is extremely important, making Telstra seem like an essential service.
It's benefiting from a return of international roaming with visitors returning to Australia, the Australian population is growing, it's growing mobile prices in line with inflation and it's investing in 5G. Plus, it's investing in growth areas such as cybersecurity and digital health. I think the defensive ASX share is well-positioned.
Telstra has a good dividend yield and it has returned to dividend growth.
Sonic Healthcare Ltd (ASX: SHL)
Sonic Healthcare is one of the biggest pathology businesses in the western world, with a major presence in Australia, the UK, the US, Germany and so on.
It's expanding with acquisitions, investing in AI and benefiting from ageing demographics. I think the ASX healthcare share has demonstrated its defensive ASX share credentials over the last four years.
Coles Group Ltd (ASX: COL)
Coles is one of the largest supermarket businesses in Australia, it also has a few liquor businesses including Coles Liquor, First Choice, Liquorland and Vintage Cellars.
I think Woolworths Group Ltd (ASX: WOW) is also defensive, though it includes some businesses that are more cyclical, such as retailer BIG W.
We all need to eat, and Australia's population keeps growing, so there are plenty of mouths that need feeding. The high cost of living may encourage more people to shop at the supermarket and eat out less.
Lottery Corporation Ltd (ASX: TLC)
This is the company that operates Australia's lotteries, including OZ Lotto and Tatts Lotto.
Some research has shown that people keep participating in the lottery even in a recession. In fact, it's possible that more people enter the lottery during a downturn.
The company's margins can benefit as more tickets are bought online over time. Plus, Australia's growing population can be a tailwind for the business.
