During troubled times, investors will naturally rush towards safe havens. As turbulence and volatility roil the stock markets, it sometimes feels like there’s no place to hide.
While most businesses will suffer from reduced demand for their products and services during a crisis, some can hold out better than others.
These are the businesses that are resilient due to the nature of their industry, or because of the assets they possess.
Separating the resilient from the rest
Strong balance sheets are an important aspect to determine if a company can weather a major storm, or not. The presence of free cash flows and the regular payment of dividends are also sure signs of stability that will give investors peace of mind.
Here are three stocks for your watchlist, as they have a very high chance of surviving a punishing bear market.
Raffles Medical Group (SGX: BSL)
Raffles Medical Group, or RMG, is one of the largest integrated private healthcare providers in Asia. The group operates a hospital in Singapore and one in Chongqing, China, as well as a large network of clinics and health screening centres in Singapore.
With healthcare demand rising in the region, RMG’s services will continue to be highly sought after.
An ageing population in Singapore and many other countries means that more people will require medical care into their silver years.
The group’s flagship hospital in Singapore has seen consistent patient demand through good times and bad.
RMG plans to open a new hospital in Shanghai this year, though plans have been delayed by the Covid-19 outbreak.
At the moment, the company’s 700-bed hospital in Chongqing is fully operational and has been ramping up since January last year.
The group also pays an annual dividend of S$0.025 (for a 2.6% dividend yield) that we believe is sustainable despite the group’s need for capital expenditures on its new hospital.
VICOM Ltd (SGX: V01)
VICOM is a leading provider of testing and inspection services. The group has two main divisions — vehicle testing and non-vehicle testing.
VICOM inspects over 400,000 vehicles annually and employs a computerised and integrated vehicle inspection system.
SETSCO, its non-vehicle inspection arm, provides testing and calibration to the aerospace, biotechnology and electronics manufacturing industries.
The group’s vehicle inspection division is expected to continue to do well as more Singaporeans choose to renew their COEs. Older cars will require more frequent inspections, which will provide a boost to VICOM despite the 0% vehicle growth rate imposed by the government.
Non-vehicle testing, though, may experience headwinds due to Covid-19 disrupting global supply chains.
The group has a rock-solid balance sheet with S$92.9 million in cash and no debt (as of 31 December 2019).
VICOM is well-poised to weather a bear market, while investors can enjoy a trailing dividend yield of around 4.8%.
Hongkong Land Holdings Limited (SGX: H78)
Hongkong Land Holdings, or HKL, owns a vast array of investment properties primarily located in Singapore and Hong Kong. HKL’s portfolio consists of office and retail properties located in prime locations.
The group’s portfolio of physical assets stands it in good stead to weather a downturn, as these properties can be counted on to generate a steady stream of rental income.
Though retail properties are facing headwinds due to the social unrest in Hong Kong, office properties have held up well, with higher average gross rents in both Singapore and Hong Kong.
Also, the recent acquisition of a 23.1-hectare mixed-use site in Shanghai, China for US$4.4 billion allows HKL to further expand its investment property portfolio for the future. The sales launch is slated for 2022 while completion is expected between 2023 to 2027.
The group pays out an annual dividend of US$0.22, and its shares offer a dividend yield of 4.5%.
Get Smart: Bear markets are temporary
The three companies above have characteristics that should allow them to survive a bear market.
However, investors should also remember that bear markets are temporary, and bad times will eventually pass.
By buying more of such companies to include in your portfolio, you can create a strong buffer during bad times, while also enjoying upside during the good times.
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Disclaimer: Royston Yang owns shares in Raffles Medical Group Ltd and VICOM Ltd.