With recent news articles on tumbling export numbers and downward revisions of Singapore’s GDP growth rate, investors cannot be blamed for feeling vexed and worried about their investments. It has been 10 full years since the Global Financial Crisis, and though recessions may feel like a thing of the past, history has shown that they do crop up time and again, though their exact timing is uncertain.
Investors may rightfully be wondering if they are able to get through a potential recession unscathed, as such economic downturns reduce consumer demand, crimp people’s propensity for spending and make companies hesitate to commit capital for large projects or acquisitions.
However, there are tried and tested ways of sailing through a downturn, and this is done by owning companies that are either immune or resilient to such economic events. With that in mind, here are four stocks that investors can consider which will provide peace of mind even if a recession should hit our shores.
1. VICOM Limited
VICOM Limited (SGX: V01) is a company that conducts testing and inspection services. It has two core divisions – vehicle inspection and testing and non-vehicular testing. Its non-vehicular division provides testing services in fields as diverse as mechanical, biochemical, civil engineering and non-destructive testing.
In the vehicle inspection space, which is mandatory as part of the Land Transport Authority’s regulations, VICOM has a strong market share of more than 75% in Singapore. It also has a rock-solid balance sheet with S$89 million in cash with no debt as of 30 June 2019 and generates consistent free cash flow every year.
2. Riverstone Holdings Limited
Riverstone Holdings Limited (SGX: AP4) is a manufacturer of nitrile and natural rubber gloves for the cleanroom and healthcare industries. The group has six manufacturing facilities in Malaysia, Thailand, and China with an annual production capacity of nine billion gloves as of 31 December 2018.
Riverstone’s business is recession-proof as it caters to the healthcare industry, which consists of clinics and hospitals. Demand for rubber gloves correlates with demand for quality healthcare services, and this is a global rising trend. The group is also into the sixth phase of its expansion plan, where total capacity will rise to 10.4 billion pieces by Q1 2020.
3. Straco Corporation Limited
Straco Corporation Limited (SGX: S85) is an operator of tourism assets in both Singapore and China. The group owns two aquariums in Shanghai and Xiamen, and 90% of the Singapore Flyer. It also owns the Lixing Cable Car in Xi’An province in China, and has the rights to develop the Chao Yuan Ge historical site there.
Straco’s business is supported by healthy tourism numbers for Singapore as well as domestic tourism in China. With a growing middle class in Asia and a higher propensity for spending, tourism is also projected to grow steadily over the years, and this will underpin demand for Straco’s attractions. The group also maintains a strong cash balance (of S$188.4 million as of 30 June) and has generated free cash flow consistently every year.
4. Singapore Exchange Limited
Singapore Exchange Limited (SGX: S68), or SGX, is Singapore’s only stock exchange. It provides a platform for the buying and selling of securities such as equities, fixed income, and derivatives. It also provides clearing and settlement services for listed companies.
As SGX is the only stock exchange in Singapore, a downturn should not affect its competitive position. The bourse is also relying more on its derivatives division to power growth rather than its equities trading division, so SGX stands to benefit during a market dislocation as traders make use of its products to hedge their portfolios.
SGX has a clean balance sheet with no debt and also has a reliable track record of paying consistent dividends to shareholders.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of VICOM Limited, Straco Corporation Limited, Riverstone Holdings Limited and Singapore Exchange Limited. Motley Fool Singapore contributor Royston Yang owns shares in VICOM Limited, Straco Corporation Limited and Singapore Exchange Limited.