Soft drinks, aged care, health insurance and property development are the sectors to head towards if the experts are correct and the Australian sharemarket is headed for a rough time in June.
Coca-Cola Amatil, aged care provider Estia Health and property group Mirvac shape up as the top three standouts for investors among the defensive stocks if the ASX succumbs to downward pressure over the next few weeks after a stellar run from April 11, where the broader ASX index amassed seven consecutive weeks of gains.
Deutsche Bank equity strategist Tim Baker has closely scrutinised the form of a range of defensive stocks based on their price-to-earnings multiples compared with where they've been trading at over the past six years, the momentum they've been building up when it comes to the grunt work of earnings per share growth, and the forecast dividend yield 12 months out.
Coca-Cola Amatil will maintain its fizz for investors seeking shelter, according to Deutsche Bank. Photo: Bloomberg
Most experts still believe that PE multiples eventually revert to the mean, and when they get ahead of historical averages they will eventually return.
On Deutsche Bank's number-crunching, Coke maker Coca-Cola Amatil, which from May 1 began a 20-year contract distributing Monster Energy drinks in Australia and New Zealand, sits on top of the defensives list. One of the most attractive features is that its 12-month forward price-earnings multiple of 16.3 times is marginally below the average of the past six years.
With a dividend yield of 5.2 per cent it also scores points as a safe bet.
Aged care provider Estia Health has been on a growth path and while its P-E multiple hovers around 17.0 times which puts it 16 per cent above its historical average, the dividend yield of 5.8 per cent is attractive for a stock with a market capitalisation of $1.1 billion. Estia was trading at close to $8 in November, 2015 and currently sits around $5.60.
Mr Baker says the strong performance of the ASX in the past two months means he's "concerned about a pull-back through the middle of the year".
The $7 billion property group Mirvac also rates highly among the Deutsche defensives list, with its P-E multiple of 14.4 times only 9 per cent ahead of the six-year average, meaning it hasn't been one which has run too far ahead of earnings expectations.
The $5 billion energy utility business DUET Group, whose assets include an 80 per cent stake in the Dampier Bunbury pipeline in Western Australia, is rated at No.4 on the seeking-shelter stocks, and while it trades on a hefty 26.1 times P-E multiple it has the most attractive dividend yield of 7.6 per cent of a basket of 44 defensive stocks examined by Deutsche.
Gas and electricity firm AGL Energy rounds out the top five, with a P-E multiple of 15.1 times only 10 per cent of where it's generally been sitting over the past six years.
Property and health is a common theme among the next five as rated by Deutsche Bank, with financial services group Suncorp at No.6, Medibank at No.7, followed by SCA Property Group, the owner of 82 shopping centres across Australasia, at No.8.
Vicinity Centres, which has $23 billion of shopping centres in its portfolio, is No.9 with a P-E multiple of 17.2 times that is running 21 per cent ahead of the six-year average, while hospital and pathology centre operator Healthscope is at No.10 with a P-E multiple running 8 per cent of the six-year average.
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