3 ASX shares to buy to recession-proof your portfolio

With Australia now in a per-capita recession, here are 3 ASX shares you can buy to protect yourself.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australia's last recession was 27 years ago, starting in September 1990.

Since the early 1990s, our economy has enjoyed decades of economic growth — the mining boom from 2002 to 2012 and the recent housing price surge in Melbourne and Sydney being two of the biggest examples. But recently, it looks like Australia's economic growth is beginning to soften.

In March, it was widely reported that Australia had two consecutive quarters of negative gross domestic product (GDP) growth for the September and December quarters in 2018. At -0.1% and -0.02% respectively, we have officially entered a per-capita recession.

What does it mean to be in a per-capita recession?

GDP measures the total value of goods and services produced by a country. Most central banks and governments around the world like to target between 2% and 3% GDP growth each year. This is the sweet spot between a declining economy with deflation and a growing economy with high inflation.

When the big figures that impact an economy weaken, that's when you get a recession. A per-capita recession, however, is different.

A per-capita recession means the population is growing at a faster rate than the economy. To use an analogy, the slices in a pie are growing faster than the pie itself.

3 ASX shares you can buy to pro officially entered a per-capita recession tect yourself in a recession

In any market cycle, there'll be winners and losers. To be a winner, the best thing you can do is be prepared and invest defensively until economic growth returns. Here are 3 ASX shares you can buy to protect yourself in a recession:

AGL Energy Limited (ASX: AGL)

People need gas, electricity and hot water, and that's not going to change in a recession. As one of Australia's largest energy providers and gas suppliers, AGL Energy is a great defensive buy. With a 5.46% dividend yield, this will provide you with stable cash flow to spend or reinvest.

Long-term, AGL Energy's focus on renewable energy will also put the company in a competitive position as the world looks to move to more sustainable energy sources.

Sonic Healthcare Limited (ASX: SHL)

Heading into a recession isn't going to slow demand for medical diagnostics. As an international medical diagnostics company, Sonic Healthcare Limited is a great option for adding healthcare shares to your portfolio.

With a recent acquisition in the US, plus its other services including laboratory, radiology and primary healthcare services, Sonic Healthcare Limited is likely to continue its strong growth especially if it meets or exceeds its annual earnings guidance.

Betashares Global Healthcare ETF (ASX: DRUG)

Economic growth has slowed around the world recently making Betashares Global Healthcare ETF another great investment to balance your portfolio. This ETF tracks an index of international healthcare companies.

Year to date, the Betashare Global Healthcare share price has grown by 5.95%. While this isn't the astronomical growth we've seen from other companies this year, the need for healthcare coupled with a globally ageing population makes this another great defensive investment option.

Foolish takeaway

It's important to remember we're not in a full-blown recession. To enter a recession, other numbers would need to weaken too such as consumer spending and export prices.

So, while we're not in a recession yet, it's good to be prepared by making sure your portfolio is balanced with stocks that still perform well in an economic downturn.

Looking for more than 3 recession-proof shares for your portfolio? Check out the Motley Fool's top 3 bluechip shares for 2019.

Motley Fool contributor Nicola Smith has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Defensive Shares

Four businessmen pull martial arts stances as they get into a defensive position.
Defensive Shares

Why I'd buy these ASX defensive shares for reliability in these times

These stocks can offer pleasing stability.

Read more »

The letters ETF on wooden cubes with golden coins on top of the cubes and on the ground
Defensive Shares

Bolster your ASX stock portfolio with these two defensive ETFs

These ETFs can help you sleep at night...

Read more »

Senior man wearing glasses and a leather jacket works on his laptop in a cafe.
Defensive Shares

Overinvested in Woolworths shares? Here are two alternative defensive ASX shares

These businesses offer strong and defensive earnings.

Read more »

Two funeral workers with a laptop surrounded by cofins.
Defensive Shares

Down 24% this year, is this top ASX defensive share a top buy according to Macquarie?

Are investors missing a trick by avoiding this ASX share?

Read more »

A young bank customer wearing a yellow jumper smiles as she checks her bank balance on her phone.
Defensive Shares

Why Telstra shares are an appealing ASX defensive pick

Can investors call on this telco stock for resilient returns?

Read more »

A woman in a hammock on her laptop and drinking a smoothie
Defensive Shares

3 ASX shares to buy for a stress-free life

I think these businesses are attractively defensive.

Read more »

a woman holds her finger to the side of her face and looks upwards as she thinks about something.
Defensive Shares

Portfolio allocation: should I still be buying ASX defensive stocks?

Is this the right time to invest in resilient businesses?

Read more »

Piggy bank at the end of a winding road.
Defensive Shares

Will lower interest rates boost ASX infrastruture stocks?

Let's take a look.

Read more »