The last two to three months have been incredibly volatile for the Australian share market.
Concerns over a US-China trade war, slowing global economic growth, and the Brexit have been largely to blame for this volatility.
While I'm optimistic that 2019 will be far better and expect markets to push higher again, I still think it could be a good idea to have a few defensive shares in your portfolio.
One group of shares that are largely defensive are the supermarkets. Should you buy Coles Group Ltd (ASX: COL), Metcash Limited (ASX: MTS), or Woolworths Group Ltd (ASX: WOW) shares?
Coles.
Although the Coles share price isn't the bargain buy it was a few weeks ago when it was trading as low as $11.26, I still see a lot of value in its shares at this level. I'm not alone in this view. Not long after being spun out of Wesfarmers Ltd (ASX: WES), analysts at Macquarie slapped a $13.48 price target on the supermarket giant's shares. Although the broker has a neutral rating on Coles' shares, I suspect an upgrade could be coming after its share price pulled back meaningfully.
Metcash.
The Metcash share price was trading at a 52-week low earlier this week. Its shares have come under pressure since the release of a disappointing half-year result earlier this month. While I think its shares look reasonably priced now, I would sooner buy Coles ahead of it. Especially given its loss of a major supply contract and concerns that the Aldi expansion could be impacting its business.
Woolworths.
I'm a big fan of Woolworths and its portfolio of brands, but at 23x earnings I think its shares are looking expensive and the Coles share price offers a far better risk/reward. Though it is worth noting that recent notes out of UBS and Citi reveal that these brokers still see value in the conglomerate's shares. The brokers have buy ratings and $31.25 and $33.00 price targets on Woolworths' shares. Both brokers are optimistic on potential capital returns next year.
