The market has always been a fickle thing. However, it has worsened in recent months and we are now operating against a backdrop of increasing political noise, near-constant anxiety over erratic economic policies, and deepening pessimism over the future of the global economy.
We are no longer certain that the Philippine economy will grow anywhere near 6 percent this year, we are not sure how many more rate cuts that the Bangko Sentral has in store for us, we can’t say for sure if ongoing trade negotiations will prevent US tariffs from coming into effect in July, and we don’t even know how we will all deal with the inevitable carmageddon that will come once the EDSA rehabilitation starts next month.
All these uncertainties (except the last one, which is just a personal anxiety of mine that I had to get off my chest) have led to market volatility measures ticking higher across all time frames and this volatility presents a substantial risk to investors.
Steep drops and sudden spikes in share prices tend to accentuate emotional biases and lead to impulsive trading decisions that can harm your long-term financial goals.
Our best bet is to go on defense.
In times of high volatility and economic uncertainty, it is best to put your hard-earned money in defensive plays.
A defensive stock is typically characterized by having a low beta or low correlation to market movements, a decent dividend yield, and a business that is relatively unaffected during economic downturns.
Top of mind defensive sectors would be basic needs like healthcare, consumer staples, and utilities.
Unfortunately, we do not have listed healthcare company in the Philippines although Ayala Corporation (AC) counts AC Health among its subsidiaries and GT Capital (GTCAP) has an indirect stake in Metro Pacific Health through its stake in now-delisted Metro Pacific Investments.
On the consumer staples side, we have Puregold Price Club (PGOLD) and Century Pacific Food (CNPF) as prime examples.
Both companies did relatively well during the pandemic and even during the high inflationary period between 2022 and 2024, as demand for household necessities and shelf-stable food items kept their revenue streams stable.
Last but not least, we have Manila Electric Co. (MER) and Manila Water Co. (MWC) representing utilities.
The revenue streams of these two companies are underpinned by near-constant demand for their services, especially from the residential segment.
Both companies also offer decent dividend yields that further improve their attractiveness as long-term investments.
We will likely get another defensive stock added to our options soon, as Maynilad Water Services (MYNLD) gears up for its much-awaited IPO in the second half of the year.
Both the timeline and pricing of the offer are not fixed yet, so it is too early to be making recommendations, but it is definitely on our radar especially since risk averse investors are likely to boost demand for its shares.
Not sexy, but it’s safe.
Defensive stocks, by and large, are not sexy bets. They don’t offer an exciting time and multibagger returns. They also tend to be heavily regulated, especially utilities and healthcare.
However, they are safe havens through turbulent times like these and they are winners if capital preservation is the name of the game.
Financial market recommendations and comments on InsiderPH News belong solely to the analysts and institutions making them. They do not represent buy, sell or hold recommendations of InsiderPH News. Investments held by analysts or institutions may influence their recommendations. Investors should conduct their own research and carefully evaluate all relevant market information before making investment decisions. As always, the past performance of any investment does not guarantee its price appreciation in the future.
