In times of uncertainty, investors like to have defensive stocks in their portfolio. Even though some market participants consider themselves to have shorter time horizons, we believe defensive stocks have a lot to offer. Rare commodities like pork and clean water could thrive really well in China for now and the near future. The current US-Iran tensions can also act as a catalyst for gold-related stocks globally.
Today, we cover 4 stocks that should be able to do reasonably well even in bad times as they tend to focus on products that most people need and can afford, and also what people tends to buy during uncertainty period.
# 1 Meituan Dianping (3690.HK)
Chinese food delivery-to-ticketing platform Meituan Dianping increased the registered capital of its cloud computing subsidiary by 8,600% on December 25, according to corporate intelligence information platform Tianyancha.com.
Why it matters: The change underlines Meituan’s push into the cloud computing market. Chinese tech giants previously focused on consumer-facing businesses are moving quickly to enterprise-facing services. Cloud computing is a major component of this.
- Meituan’s push to cloud computing business is reminiscent of Alibaba and Tencent’s shift to enterprise-faced services.
- The lifestyle services unicorn announced in January that it would invest RMB 11 billion (around $1.7 billion) this year to help merchants upgrade their operations and drive the growth of China’s “Delivery Economy,” a term that refers to the country’s on-demand services boom.
#2 Guangdong Investment (0270.HK)
Guangdong Investment Group (0270.HK) owns essential utilities such as the Dongshen Water Supply Project, which supplies most of Hong Kong’s water. The revenue from water supply to Shenzhen and Dongguan has increased steadily, rising by 12.5% year-on-year in 2018, a strong driver for revenue growth. The company also invests in other essential utilities such as sewage treatment, water distribution, toll roads, power plants, and bridges across mainland China in addition to property and department stores.
Nearly two-thirds of the company’s adjusted operating profit comes from its water business and another 10% from its infrastructure investment business. Due to the essential nature of sewage and water distribution, the company’s cash flows are fairly predictable. Regardless of the political situation, everyone living within Hong Kong will still need water and sewage treatment. Guangdong Investment’s dividend for the past 8 years grew at a compound annual growth rate of over 17%. Its dividend yield is around 3.3%
The real estate business has become another highlight. For example, its Tianhe City shopping center in Guangzhou has an average occupancy rate of 99. 9%. In addition, many properties in Guangdong are located in the Dawan District and they can benefit from the rapid development of the area.
Two of its property projects in Buxin and Wanbo are expected to generate cash flow in 2020 and 2021, which will enable the company to invest in more water resources projects. Guangdong Investment has been recording increasing dividends, nearly doubling from 28 cents per share in 2014 to 54 cents in 2018, making this stock more popular with conservative investors. While growth of the company is modest, investors could benefit from upside in its real estate business.
#3 China Brilliant Global (8026.HK)
Usually, GEM stocks see volatility due to things like news or industry events. For traders who have been following our coverage closely on China Brilliant Global(8026.HK), you will notice how much the stock has gone up since our first coverage and we hope you had made some profit from this. China Brilliant Global definitely meets the criteria to be one of the top micro-cap stocks to watch as it has great trading volume, consistent trend for the past few months and a healthy balance sheet to top it off.
The revenue of the Group for the six months ended 30 September 2019 amounted to approximately HK$51,186,000, representing an increase of approximately 15.22% as compared to the corresponding period of the previous financial year. With their banking business in Kazakhstan starting to take off, their share price had break the upper resistance limit for the past few months, reaching at 0.81 HKD per share from 0.7+ in December.
SOLID GROWTH & GOLD PRICE AT 7-YEAR HIGH
First and foremost, the Jewellery business had achieved a 121% increase in revenue for the quarter ended 30 June 2019. The increase in revenue from this operating segment was mainly due to the increase in wholesale of golden jewelry products in Mainland China. Analysts believe that the sales of golden jewelry products would only keep going up driven by surging gold prices.
The Group’s revenue for the three months ended 30 June 2019 showed an increase of approximately 21.6% compared to the corresponding period last year. The increase was mainly attributable to the increase in revenue from the Group’s Pharmaceutical business as the medicine distribution channel had grown to become even more comprehensive during the period under review.
Since going public in March 2000, the Group has been disposing of some of its less profitable businesses and has been focusing on expanding their currently profitable businesses. It is plausible that the Group is currently shaping its business strategies to play on the theme of the consumption-driven Chinese economy, by taking advantage of the increasing appetite in gold and high demand in pharmaceutical & healthcare products. These are the factors deemed to be the driving force behind the growth in the stock price recently.
We must also not forget that a robust capital structure is essential to any business. CBG currently adopts a prudent cash and financial management policy, in which it holds a healthy amount of cash and has not taken any loan from third parties. It is not without reason that analysts feel that this recent increase in stock price is merely the start for CBG.
#4 Sands China (1928.HK)
Sands China saw its third-quarter results flat year-on-year with a net income of USD 454 million. Nevertheless, the company is a leader within the mass market gaming segment in Macau. The company also is also known for providing facilities for meetings, incentives, conferences, and exhibitions. These provide a diversifying source of revenue. With a dividend yield of nearly 5%, this is a stock worth serious consideration.