Interest Rates Expected to Keep Rising: 5 Stocks That Will Protect Your Portfolio From Harm
The latest macroeconomic data out of the US seems to indicate that further interest rate hikes by the US Federal Reserve are on the horizon.
With inflation higher than forecast, the Federal Reserve plans to step up its resolve to curb inflation.
Investors will be dismayed that interest rates will not only rise faster, but also reach higher levels than previously thought.
Higher interest rates mean more trouble for heavily indebted companies, as they end up paying higher financing costs.
Therefore, an effective way to protect your portfolio is to select companies that have minimal or no debt.
Such stocks are isolated from the effects of higher interest rates because they rely on internally generated cash flow to fund their operations.
Here are five stocks that might fit that bill.
VICOM Limited (SGX:WJP)
VICOM is a leading test and inspection group offering a full range of vehicle and non-vehicle testing services, including mechanical, biochemical and structural engineering.
The group reported solid 2022 results, with revenue up 7.3% year-on-year to S$108.3 million.
Operating profit increased 5.4% year-on-year to S$32.7 million while net profit increased 5.7% year-on-year to S$26.2 million.
VICOM’s balance sheet as of December 31, 2022 showed S$60.5 million in cash excluding debt.
The inspection specialist also declared a final dividend of S$0.0332, bringing the dividend for 2022 to S$0.0664.
Demand for non-vehicle testing services is expected to increase, while demand for vehicle testing should remain stable this year.
HRNetGroup AG (SGX: CHZ)
HRNetGroup is a leading recruitment and staffing company with over 900 consultants in 15 Asian cities.
The group operates a total of 13 human resources (HR) brands, including Recruit Express, HRnetOne and PeopleSearch.
HRNetGroup reported respectable profits for 2022, with revenue up 3.6% year-on-year to S$611.8 million.
Net income increased 3.1% year-on-year to S$67.5 million.
Like VICOM, the HR specialist has no debt and holds S$284.6 million in cash on its balance sheet.
The company also generated healthy free cash flow of S$73.7 million last year.
Boustead Singapore Limited (SGX: F9D)
Boustead Singapore Limited, or BSL, is an engineering conglomerate with four core divisions – Power Engineering, Real Estate Solutions, Geospatial Technology and Healthcare.
The engineering group had S$15.3 million in debt but held S$387.5 million in cash along with S$7.5 million in investment securities.
Boustead reported weak earnings for the first half of fiscal 2023 (1H FY2023) ended September 30, 2022.
Sales declined 27% year-on-year to S$246.9 million due to a decline in sales in both the Power Technologies and Real Estate divisions.
Net income after adjusting for one-time expenses fell 28% year-on-year to S$13.6 million.
However, free cash flow more than doubled year-on-year to S$41.5 million from S$15.8 million.
Haw Par Corporation Limited (SGX: H02)
Haw Par is also a conglomerate and has four core areas – healthcare, leisure, real estate and investments.
As the owner of the Tiger Balm brand, Haw Par has one of the leading pain reliever brands in its business.
Haw Par has seen a strong rebound in its healthcare business as countries opened their borders last year.
Revenue for 2022 increased 29% year-on-year to S$182.1 million while net income increased 34.7% year-on-year to S$148.3 million.
The group maintained a solid balance sheet with S$334.3 million in cash and only S$28.5 million in debt.
In addition, Haw Par held S$2.8 billion in strategic and long-term investments, primarily in United Overseas Bank Ltd (SGX: U11) and UOL Group Ltd (SGX: U14).
Credit Bureau Asia (SGX: TCU)
Credit Bureau Asia, or CBA, provides credit and risk information services to a customer base of banks, financial institutions, telecommunications companies and government agencies.
CBA reported revenue growth of 7.1% yoy to S$48.6 million while net income improved 7.2% yoy to S$8.4 million.
The credit risk assessor had a clean balance sheet at December 31st with S$34.7 million in cash and no debt.
The group also generated free cash flow of S$19.9 million for 2022.
Late last month, CBA announced that it had partnered with Credit Bureau Cambodia to launch the first cross-border collaboration between the two credit bureaus.
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Disclosure: Royston Yang owns shares in Boustead Singapore Limited.