All Ordinaries (ASX: XAO), or All Ords, shares that perform well during downturns and economic booms can be attractive but hard to identify.
Many ASX businesses are fairly reliant on households and businesses remaining in good financial shape to perform well.
ASX bank shares can suffer if bad debts increase, ASX retail shares may hurt if consumers are spending less, job-related businesses (including SEEK Limited (ASX: SEK) ) may decline if employment suffers, and so on.
The Australian economy grew by 0.2% in the three months to June 2024 and 1% in the prior 12 months. This was the weakest annual result (outside of the COVID-19 period) since the early 1990s. On a per-person basis, Australia's economy has declined for a sixth consecutive quarter.
So, let's discuss two ASX All Ords shares that I think can continue delivering strong profits whether a recession arrives or the economy improves. If the share prices were to fall, they would simply become a better buy.
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Telstra Group Ltd (ASX: TLS)
Telstra is Australia's leading telecommunications business. It has the largest network coverage, the biggest market share and the most extensive capital expenditure plans.
The company provides services to millions of mobile subscribers and businesses. An internet connection is essential for many people for communication, work, entertainment, education and more. I believe a large majority of subscribers will keep paying for their subscriptions even if they don't have a lot of spare cash flow.
I think Telstra's net profit after tax (NPAT) could hold up well even if the economy remains subdued because it continues to grow subscribers and mobile prices. FY24 underlying average revenue per user (ARPU) grew 2.7%, and the number of mobile handheld users rose 4.1%.
If the ASX All Ords share's profit remains resilient, then any decline in the Telstra share price should lead to a more appealing price/earnings (P/E) ratio. For other (weaker) businesses, a recession and share price decline may not make the P/E ratio more appealing if the E part of the equation – earnings – declines too.
Wesfarmers Ltd (ASX: WES)
Wesfarmers owns various retailers, including Bunnings, Kmart, Target, Priceline and more.
The company prides itself on offering customers appealing value credentials on the products it sells, particularly through Kmart and Bunnings.
Wesfarmers has indicated that Kmart and Bunnings have captured market share. So, while households are spending less, Wesfarmers is capturing a greater share of their spending. Ongoing economic pain in Australia could enable the ASX All Ords share to capture even more market share.
I believe the company can continue growing profit in the current environment, which would make any drop in the Wesfarmers share price more appealing. I like the company's efforts to diversify its business portfolio into areas like healthcare.
It is priced highly, but I'd call it one of the best companies on the ASX, so it's worthy of value at a higher earnings multiple. A lower price would make it even more appealing, in my opinion.
