Some people seem to think that an Australian recession is getting a bit closer, particularly with how Australia’s property prices continue to decline.
If that’s the case then it’s hard to say what the effect would be for domestic ASX businesses like Commonwealth Bank of Australia (ASX: CBA) and Wesfarmers Ltd (ASX: WES).
I think the below three ASX shares could be good to own during an Australian recession due to their international exposure and little Australian exposure:
Magellan Global Trust (ASX: MGG)
This is a listed investment trust (LIT) which is operated by the high-performing global fund manager Magellan Financial Group Ltd (ASX: MFG).
The LIT aims to invest in the highest-quality businesses in the world whilst also providing a high level of protection with its defensive positions, including cash. Magellan’s biggest positions at the end of March 2019 were: 17% cash, Alphabet & Facebook each with allocations above 7% and Starbucks & Apple each with allocations above 6%.
Over the past year it has delivered a net return (after fees) of 15.7% and it is valued at a slight discount to its underlying assets.
WAM Global Limited (ASX: WGB)
WAM Global is the listed investment company (LIC) in the Wilson Asset Management (WAM) stable that invests in small and medium sized international businesses.
The global definition of small is quite different to the ASX meaning. The ASX is based in a country with a small population, whereas global shares could be ones that are focused on the large US economy or the entire global economy.
WAM Global had 17.6% of its portfolio in cash at the end of last month. Some of its biggest holdings at the end of March 2019 were: Alphabet, American Express, Danone, Diageo, HCA Healthcare, Logitech and Reckitt Benckiser.
It’s currently trading at a 12% discount to its last stated pre-tax net tangible assets (NTA) per share.
iShares S&P 500 ETF (ASX: IVV)
One of the simplest ways to diversify your investments overseas could be with one of the best exchange-traded funds (ETFs) in the world.
The S&P 500 index includes many of the best businesses that are listed in the US. Its top holdings include Microsoft, Apple, Amazon, Facebook and Berkshire Hathaway.
This ETF has an extremely low management fee of 0.04% per annum. I’d happily own this ETF as my only holding if I had to.
Each of the above ASX shares generate most of their underlying earnings from outside of Australia and could be good ideas to protect against an Australian recession. At the current prices, I prefer the idea of WAM Global because of its sizeable valuation discount.
Another way to protect against an Australian recession is to invest in very defensive ASX shares like these ones.
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Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS and WAMGLOBAL FPO. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. 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.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019