Defensive investment strategies are those that maintain holdings in safe assets, which include stocks that meet a certain criteria that avoids losses in market value. To do this, you need to find the important traits present in these companies, which are namely a robust balance sheet, strong liquidity and a proven ability to earn money over time. Through my own research I found Westshore Terminals Investment, Gildan Activewear and Saputo, which can be a good place for you to start your hunt.
Westshore Terminals Investment Corporation (TSX:WTE)
Westshore Terminals Investment Corporation, through its limited partner interests in Westshore Terminals Limited Partnership, operates a coal storage and loading terminal at Roberts Bank, British Columbia in Canada. Westshore Terminals Investment was started in 1970 and with the stock’s market cap sitting at CAD CA$1.53B, it comes under the small-cap group.
At present the company has a strong balance sheet as there is no debt on the company’s books and no concerns around solvency or interest repayments. Furthermore, at a CA$1.53B market cap and a PE of 13.56x, sufficiently greater liquidity is offered at a good price relative to the market, enabling the stock to better withstand selling pressure during market downturns. To add to this, WTE has recorded a healthy 19.86% annual growth in earnings over the past 5 years and a 13.39% ROA in the past year (beating the industry by 7.54%), which shows WTE contains many of the valuable traits in a defensive stock. Interested in Westshore Terminals Investment? Find out more here.
Gildan Activewear Inc. (TSX:GIL)
Gildan Activewear Inc. manufactures and sells a range of apparel products in the United States, Canada, Mexico, Europe, the Asia-Pacific, and Latin America. Started in 1984, and currently run by Glenn Chamandy, the company size now stands at 50,000 people and with the company’s market capitalisation at CAD CA$8.22B, we can put it in the mid-cap category.
GIL’s financial management makes the company a solid defensive candidate , with long-term commitments covered by cash and short-term assets at a ratio of 1.95x. Additionally, operating cash flow is at a good level relative to overall debt at 97.36%, making an investment in the company a safer bet if the cycle turns against you. Moreover, as its price gives it a CA$8.22B value on the market , investors have the added benefit of solid liquidity, which minimises the potential for rapid share price falls in down cycles. With positive annual earnings growth of 10.46% over the past 5 years and an industry-beating 12.74% trailing 12-month ROA, GIL is a strong candidate for a bear market based on these defensive tenets. Interested in Gildan Activewear? Find out more here.
Saputo Inc. (TSX:SAP)
Saputo Inc. produces, markets, and distributes various dairy products in Canada, the United States, Argentina, and Australia. Founded in 1954, and currently run by Lino Saputo, the company currently employs 12,800 people and with the market cap of CAD CA$15.99B, it falls under the large-cap category.
SAP’s financial management makes the company a solid defensive candidate , with long-term commitments covered by cash and short-term assets at a ratio of 1.32x. On top of this, cash flow from operations is 30% of total debt, a strong sign, which provides a safe buffer for servicing debt if difficult conditions prevail in the market. With Saputo’s market value of CA$15.99B , the company is a large-cap that benefits from greater liquidity and trading volumes, which reduces risk of firm price declines and allows you to sell without a large loss due to unattractive spreads. With that has also been annualised earnings growth of 10.19% for the last 5 years and an even greater 25.81% last year, which demonstrates SAP has maintained attractive fundamentals for a defensive portfolio. More detail on Saputo here.
Investors! Do you know the famous “Icahn’s lift”?
Noted activist shareholder, Carl Ichan has become famous (and rich) by taking positions in badly run public corporations and forcing them to make radical changes to uncover shareholders value. “Icahn lift” is a bump in a company’s stock price that often occurs after he has taken a position in it. What were his last buys? Click here to view a FREE detailed infographic analysis of Carl Icahn’s investment portfolio.