Insights

5 defensive ASX shares to guide you through the market correction

The market is getting hammered, but one fund reckons these 5 stocks could take you to the light at the end of the tunnel.
The post 5 defensive ASX shares to guide you through the market correction appeared first on The Motley Fool Australia. –

As Australia battles the Delta strain of the coronavirus, the S&P/ASX 200 Index (ASX: XJO) has nosedived 3.8% over the last month.

It’s even more depressing to think it’s lost 5% since its mid-August peak.

So more investors are now starting to wonder about defensive ASX shares.

Pengana Australian Equities Fund is certainly thinking that way, according to a webinar seen on Tuesday.

Analyst Mark Christensen said his team is unearthing resilient stocks by applying one of 3 tests:

Inflation protection through pricing power and long-term contracts
Avoiding ‘forecasting errors’ for post-lockdown and post-COVID performance
Resilience to supply chain and inventory disruptions

What does the Pengana team mean by “avoiding forecasting errors”?

“We protect ourselves here by making sure that we’re in defensively characterised businesses to start off with,” he said.

“That is businesses that are not going to have volatile earnings. Businesses that have been pretty solid through COVID and hopefully coming out of it as well. And whose underlying drivers are not so cyclical but have some fundamental growth underlay.”

The additional element the Pengana team favours is transparent business models, which provide certainty for ongoing earnings.

People need these products, it’s not a choice

Christensen cited respiratory device maker Resmed CDI (ASX: RMD) as a classic defensive example.

“People who use those products do so because they need them. It’s not discretion.”

Resmed shares are down a whopping 11.3% over the past month, but have climbed 27.4% this year despite that.

Supermarket giant Woolworths Group Ltd (ASX: WOW) is another business with a transparent revenue model and stable earnings.

“Woolworths is obviously a very defensive stock,” said Christensen.

Shares for Woolies are up nearly 16% for the year so far, but have shaved 3.6% from the price over the past month.

The other ASX shares Christensen likes for their resilience are healthcare player CSL Limited (ASX: CSL), private hospital network Ramsay Health Care Limited (ASX: RHC), and property developer Mirvac Group (ASX: MGR).

CSL and Ramsay have been hammered 6.5% and 4.3% downwards respectively in the past month. Mirvac shares have lost 6.2%.

“More than half of our portfolio is in what we call defensive names, and that helps a lot when we’re making an assessment about what future earnings look like.”

The post 5 defensive ASX shares to guide you through the market correction appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

5 things to watch on the ASX 200 on Wednesday

The RBA gives ASX 200 shares a slither of good news on a down day

Is the CSL (ASX:CSL) share price a buy today?
These 3 ASX 200 shares are topping the volume charts this Tuesday

How has the AMP (ASX:AMP) share price beaten the market over the past week?

Motley Fool contributor Tony Yoo owns shares of CSL Ltd. and ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has recommended Ramsay Health Care Limited and ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!