Share Picks
It's not time to unpack your budgie smugglers just yet, EasyVSTRs, as we might be set for another round of defense as uncertainty levels get elevated.
Economic uncertainty is escalating around the globe, and with more possible downturns expected in the stock market, we are still looking towards defensive shares during these times.
2 Defensive share picks across the Healthcare and Insurance sectors to mitigate some risk:
Healthcare:
ResMed Inc. (RMD)
This forward-thinking "MedTech” manufactures, develops, and markets medical devices and cloud-based software applications for the healthcare sector.
ResMed’s software applications diagnose, treat, and manage respiratory disorders such as sleep apnoea and chronic obstructive pulmonary disease (COPD). The ASX healthcare share has been outperforming the ASX 200 during June, which got analysts excited that we could see more upside for the share over the long term. ResMed’s latest acquisition of Medifox Dan will enable the company to expand its growing SaaS business into Europe.
- Share Price: AU$ 32.48
- Market Cap: AU$ 47.04 billion.
- P/E Ratio (TTM): 41.12x
- P/B Ratio: 10.6x
- Dividend (Annual Yield %): 0.51%
- Franking: 0%
- 52 Week range low of AU$ 27.37 and AU$ 40.79 share high.
Outlook – ResMed Inc has an industry-leading portfolio of products and acquisitions, which grows yearly and should continue to add to the bottom line over time. By our estimates, the share is overvalued compared to the industry on a price-to-earnings basis but considering expectations of a 30% growth in earnings per share (EPS) in this space for H2 FY22, ResMed is worth the look.
Technical Outlook: The price action has been trending lower in a channel since reaching all-time highs back in September 2021 and tested a significant support level around AU$27.41 a share. The relative strength index (RSI) of price has reached overbought levels, but this does not necessarily mean that price will reverse. The RSI can remain at overbought levels for weeks, supporting the recent uptrend in price from the major support level. ResMed has a Beta of 0.42 compared to the broader market, and short interest is also low at 0.99%, while the average analyst price targets (green line) are at AU$35.40 a share.
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Insurance:
NIB Holdings Limited (NHF)
Insurance is "Big Business," and NIB Holdings Limited has been raking it in since the 1950s to become one of the most significant insurance shares by market cap on the ASX.
NIB, together with its subsidiaries, underwrites and distributes private health insurance and travel insurance to over 1.6 million Aussies and Kiwis. The insurance industry is sometimes overlooked during economic uncertainty but has repeatedly proven its resilience. The insurance share posted an earnings update which showed HY Revenue from ordinary activities rose 7%.
- Share Price: AU$ 7.54
- Market Cap: AU$ 3.46 billion.
- P/E Ratio (TTM): 19.58x
- P/B Ratio: 4.7
- Dividend (Annual Yield %): 3.31%
- Franking: 100%
- 52 Week range low of AU$ 6.07 and AU$ 8.05 share high.
Outlook – Higher interest rate environments boast well for the insurance sector because the insurer must hold enough secured debt to cover their policies, and as yields rise, so does their income. The company’s share price also reacted positively during these uncertain times and has increased more than 20% over the last year. Another reason we find NIB so attractive is that its dividend yield is sitting at a healthy 3.4%.
Technical Outlook: The price action broke out of a triangle formation after positive fundamental updates and has pushed higher to the significant resistance level at AU$ 7.68 a share. We might see the price move lower to the AU$ 7.19 support level before driving higher, which could give better entries. It should be noted that the average analyst price target (green line) is lower than our estimate and closer to the triangle breakout at AU$ 6.89 a share.
Although the relative strength index (RSI) of price is decreasing, NIB Holdings Limited has a very low Beta of 0.29 while short interest remains low at 0.78%.
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and want to know more about our other stock picks?
Read: 3 Defensive ASX Picks
Sources – EasyResearch, Australian Securities Exchange (ASX), Australian Securities & Investments Commission (ASIC), Bloomberg, Reuters, ResMed Inc, Koyfin, Zach Bristow, James Mickleboro, Bernd Struben, NIB Holdings Limited, Hot Copper,
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Barry is a market analyst with GT247, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.
