Insights

Tolls and phones: Wilsons unveils 3 ASX shares to buy for a slowing economy

The Reserve Bank is raising rates to intentionally reduce demand for goods and services. Which companies will fare best in such an environment?
The post Tolls and phones: Wilsons unveils 3 ASX shares to buy for a slowing economy appeared first on The Motley Fool Australia. –

Interest rates rose again this week for the second consecutive month.

Believe it or not, the Reserve Bank of Australia is deliberately trying to slow the economy down.

It wants Australians to spend less, thus reducing demand for goods and services.

That’s obviously not the best environment for any business, not just ASX-listed companies.

When central banks do this, it is playing with fire. It has to be careful not to slow down activity so much that the country falls into recession.

Wilsons head of investment strategy David Cassidy thinks authorities will be successful in avoiding a global recession, but it will still be a bumpy ride.

And in such nervous times, he would pick only very specific ASX shares to buy.

“With the return and volatility of quality defensives being historically superior to those of broader equities during choppy market conditions, investors may benefit from purchasing these stocks during turbulent times.”

Cassidy names three such quality defensive ASX shares in a recent Wilsons memo:

Market dominance matters when people have less to spend

One important theme that Cassidy’s team seeks in quality defensive shares is market dominance.

The idea is that if a company has a monopoly or a massively unassailable position, economic downturns don’t matter as customers still have no choice but to buy its goods and services.

They could even raise prices in response to inflation, and would not lose business.

A great example of this is toll road operator Transurban Group (ASX: TCL).

“Toll roads are used every day to get from A to B and pre-COVID had steady, consistent earnings growth,” he said.

“Transurban is our pick with its monopolistic power in NSW, VIC, and QLD. TCL should be able to pass inflation costs onto the consumer as prices rise.”

The Transurban share price has risen more than 4% year-to-date during a period in which the rest of the non-mining market has struggled. The stock also pays out a 2.5% dividend yield.

Cassidy also identified telephony as an “essential” service for Australians.

And he, not surprisingly, likes the market leader.

“Providers like Telstra Corporation Ltd (ASX: TLS) operate within an oligopoly with solid pricing power,” said Cassidy.

“Earnings are unlikely to be volatile now competition in the market has subsided.”

Telstra shares have dipped around 8% since the start of this year, while giving out a 2.8% dividend yield.

The third ASX share Cassidy named is related to a very basic human need — hunger.

“Since people need to buy food and basic household items, stocks from these sectors can do well when volatility is high.”

Australia has an effective duopoly in the supermarket sector, but Cassidy has a definite favourite out of Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

“The underperformance in Woolworths adds to the case for buying at current prices,” he said.

“Woolworths’ valuation premium to Coles has also been eroded slightly over the past few months.”

Indeed the Woolworths share price has dropped more than 10% so far this year. The ASX share hands out a 2.7% dividend yield.

The post Tolls and phones: Wilsons unveils 3 ASX shares to buy for a slowing economy 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 over ten 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 January 12th 2022

More reading

Here are the 3 most traded ASX 200 shares on Tuesday
Will June be a good month for the Transurban share price?
Analysts name 2 top ASX 200 dividend shares to buy right now
Transurban share price hit by broker downgrade
What’s the outlook for the Telstra share price in June?

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 COLESGROUP DEF SET and Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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.

  • This field is for validation purposes and should be left unchanged.

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

Share With Your Friends

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, 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.

FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here To Get Started
FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here For More Info