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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 successfully, there are certain fundamentals that you should look for, which include but are not limited to: financial health, liquidity and reliable earnings capacity. Below are a few options I am looking at: Dah Sing Banking Group, CK Asset Holdings and China Railway Signal & Communication.
Dah Sing Banking Group Limited (SEHK:2356)
Dah Sing Banking Group Limited, an investment holding company, provides banking, financial, and other related services in Hong Kong, Macau, and the People’s Republic of China. Started in 2004, and currently lead by Hon-Hing Wong, the company currently employs 2,825 people and has a market cap of HKD HK$26.38B, putting it in the large-cap group.
2356’s financial management makes the company a solid defensive candidate , with the majority of liabilities made up of low risk funding such as deposits which account for 88.91%. To add to this, of the loans that they make, only 0.61% are considered as a write-off, meaning if economic conditions dampen the company’s ability to grow earnings, 2356 should still be able to service debt. because it’s a mid-cap stock priced at HK$26.38B and a PE of 12.08x, greater liquidity is offered at a good price relative to the market, which minimises the potential for rapid share price falls in down cycles. With positive annual earnings growth of 10.98% over the past 5 years and an industry-beating trailing 12-month ROA, 2356 holds many of the keys to avoiding the potentially destructive forces of a bear market. Dig deeper into Dah Sing Banking Group here.
CK Asset Holdings Limited (SEHK:1113)
CK Asset Holdings Limited operates as a property developer in Hong Kong, the Mainland, Singapore, the United Kingdom, continental Europe, Australia, Canada, and the United States. Started in 2015, and currently run by Tzar Li, the company provides employment to 20,200 people and with the company’s market capitalisation at HKD HK$244.40B, we can put it in the large-cap group.
The company’s capital structureis attractive , due to high liquidity with current assets covering liabilities by 2.78x. This debt is also well-supported by cash flows generated from day-to-day operations, reaching 68.88% of borrowed funds, providing greater comfort for investors that the company is well-grounded if equities become out of favour. Because it’s a large-cap stock priced at HK$244.40B and a PE multiple of 8.19x, there is a liquid market for the stock which is relatively undervalued compared to the market, helping curtail the rate of decline in share price during periods of mass selling. As earnings have annually compounded at 12.59% over the past 5 years and last year’s growth was 55.16%, the company is a strong candidate for a bear market based on these defensive tenets. Dig deeper into CK Asset Holdings here.