3 ASX ‘defensive’ stocks to watch during the corona-economy
We take a look at how some of Australia’s best-known defensive stocks have performed in recent times, as global market volatility spikes as a result of Covid-19.
CSL share price: a strong outperformance
The volatility in ASX 200 shares since the coronavirus seized global markets has investors scrambling for defensive stocks to level out their portfolios.
Since peaking at 7,197 points on February 20, the ASX 200 tumbled 39% to 4,402 points on 23 March. It has since rebounded to finish today’s session at 5,238 points, representing a 27% decline from its peak.
Against this backdrop, the share price performance of some of Australia’s tried and true defensive stocks – CSL, Telstra and Sydney Airports – has been quite varied. This reflects the context with which each company met the coronavirus crisis and, in one obvious case, an unfortunate dose of bad luck.
Starting with CSL, one of Australia’s greatest business success stories of the last few decades.
When the ASX 200 shares peaked in February, CSL shares were changing hands at $339.42 per share. The company’s shares finished today at $313.00 per share, a drop of just 7.8%, giving it a market cap of $141 billion.
On 8 April, CSL affirmed its guidance for the full year. This was met with obvious approval from relieved shareholders, even if the company had to delay capex and clinical trials due to coronavirus risk.
Overall, the biotech behemoth said there was no interruption to its supply chain. Even its facility in Wuhan, China, ground zero for the crisis, has resumed operations.
While most Australian businesses have seen a decline in sales, CSL has actually experienced a rise in demand for its intravenous immunoglobulin and influenza vaccines.
The company also got some great publicity for joining forces with rival SAB Biotherapeutics, via its CSL Behring arm, to develop a coronavirus treatment.
Telstra share price remains solid, Sydney Airport grounded
Telecommunications giant Telstra has performed far better than the ASX 200 in the last two months.
Its share price has fallen 19% since February 20 to close today’s session at A$3.04. This is comfortably better than the benchmark Australian index. As a defensive stock, technically speaking, it’s doing its job.
Interestingly, Telstra is Australia’s most widely held stock by small investors because of its historically high dividend. However, the company had to start cutting its dividend in recent years due to a revenue crunch. In 2015, its share price was more than double its current levels.
To appease frustrated shareholders, the company started laying off staff. But the coronavirus pandemic has halted this program. Telstra has also decided to double-down on its expensive 5G rollout.
Meanwhile, Sydney Airport represents one of the unluckiest defensive stocks in the current market.
Its share price is down 30.7% since 20 February, which is worse than the ASX 200. Positively at least, the company has secured extra bank debt facilities worth $850 million.
Data for the first 16 days of April showed international passenger traffic plunging 96.1%, with domestic passenger traffic tanking 97.4%.
While Sydney Airports has lost some lustre with plans to build a second airport for Sydney, its share price reflects the nature of the coronavirus pandemic – a disaster for travel stocks.
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