Wesfarmers Ltd (ASX: WES) shares climbed 4.11% higher yesterday in a strong start to the month. The ASX 200 conglomerate has been under pressure in 2020 and its share price has fallen 13.90% lower this year. But despite slumping lower, could Wesfarmers shares actually be a safe buy in the current bear market?
Are Wesfarmers shares a safe buy?
Investing in ASX shares can bring great returns, but that comes with risk. The S&P/ASX 200 Index (ASX: XJO) has fallen 21.33% lower this year after a spectacular bull run last year. But Wesfarmers could be better placed than many of its ASX 200 peers.
For one, Wesfarmers is a conglomerate. This means that rather than focusing its attention on one industry or sector, Wesfarmers operates across several. The group has interests in retail, chemicals, industrials and safety products. So while the economy might be hit by the coronavirus-led shutdown, Wesfarmers' earnings streams are diversified. That's good news for Wesfarmers shares and could make it a safe buy compared to its peers.
Secondly, Wesfarmers is big. The Perth-based group boasts a market cap of $40.46 billion right now. That's comfortably within the largest 20 listed companies on the ASX. Wesfarmers shares have been steadily climbing over the years and are worth triple what they were in March 2009.
Thirdly, Wesfarmers is an ASX dividend share. The group is currently yielding 4.29% per year at its current $35.68 share price. While some dividend yields can be misleading, cash in your pocket is always good in a bear market, which could make Wesfarmers shares a safe buy in 2020.
Lastly, Wesfarmers has a strong financial position, having just sold a 5.2% stake in Coles Group Ltd (ASX: COL) for $1.06 billion. In its half-year result, the group already reported $406 million in cash and $1,039 million in free cash flow. Add in the extra Coles money and you've got a solid financial position to boost Wesfarmers shares higher despite the downturn.
