Suddenly, everyone seems to be talking about a potential recession. Given the current economic uncertainty, now may be an opportune time to consider investing in shares.
On the other hand, it's equally important to think about ways to protect your investment portfolio in case the economic situation deteriorates before it starts to improve.
Investing in companies with solid fundamentals, a diversified portfolio, and possessing defensive characteristics can be a prudent strategy during such uncertain times. These factors can provide stability and open up possibilities for growth.
Here are three ASX shares that could weather economic downturns and potentially thrive.
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BHP Group Ltd (ASX: BHP)
The BHP share price is currently trading at $41.39, near its 52-week low of $41.
While weak commodity prices remain a cause for concern, recent share price weakness has put its valuations at reasonable levels: a price-to-earnings (P/E) ratio of 10x and a price-to-book (P/B) ratio of 2.8x on FY25 estimates by S&P Capital IQ.
Let's not forget that BHP offers a fully franked dividend yield of 5.67% at its current share price.
The Big Australian needs no introduction. The mining giant offers investors exposure to diversified commodities, including iron ore, copper, and petroleum.
With a robust portfolio and strategic operational efficiency, BHP is well-positioned to navigate through economic cycles.
The company's strong cash flow generation and commitment to sustainable practices make it a solid choice for investors seeking stability in turbulent times.
Aspen Group Limited (ASX: APZ)
Even during a recession, people still need a place to live. Aspen Group is a real estate investment trust (REIT) focusing on affordable housing and retirement living.
REITs like Aspen Group often perform well during economic downturns due to their stable rental income streams and defensive nature. Even better, Aspen Group is focused on 'affordable housing,' which means the cheaper end of the housing market.
Aspen's strategic acquisitions and prudent management of its property portfolio bolster its resilience against economic headwinds, making it an attractive pick for conservative investors.
The Aspen Group share price has risen 9% since June, but the company still trades at 13x FY25 earnings estimate by S&P Capital IQ and less than 1x its book value. Currently, the company offers a dividend yield of 4.35%.
HomeCo Daily Needs REIT (ASX: HDN)
HomeCo Daily Needs REIT specialises in retail properties that cater to consumers' essential needs. Think of everyday names like Coles, Woolworths, Bunnings, etc.
Whether there is a recession or not, consumers will likely still shop at those places, and these businesses will likely continue diligently paying rent to their landlords.
Retail REITs can be defensive in recessionary environments as they provide essential services and products.
HomeCo Daily Needs REIT's diversified tenant base, and strategic locations enhance its ability to withstand economic pressures while potentially delivering steady dividends to investors.
Analysts at Morgans seem to agree. As my colleague James highlighted, Morgans believes that "the portfolio has resilient cashflows" and that "the development pipeline provides growth opportunities."
HomeCo Daily Needs REIT units are valued at a P/E ratio of 14x and just 0.85x their book value, based on FY25 estimates by S&P Capital IQ. The company offers a distribution yield of 6.78%.
