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Three COVID-19 resistant small caps to put in your portfolio

In times like these, you wonder if there are any stocks that can outperform in a market crisis. Here are three small caps that could potentially shine during this bear market.
 

The ship builder Austal (ASB) is a key source of diversification in the Under the Radar’s small cap portfolio since around 90% of revenue is contracted from US and Australian governments.  We think companies will be able to rely on previously contracted revenue from government customers.  Governments will be reluctant to allow their defence capabilities to diminish because of the impact of this virus.

There are big risks, but it helps if your operations are essential. Last month Austal announced that its US operations, employing 4000 people, are to remain operational, having been designated mission critical.

Then there is Freedom Foods (FNP). It’s not hard to see why consumers are looking for its combination of dairy and plant based food products, which include milk, nutritional powders, cereals, muesli bars and nuts. People need nutritious foods more than ever.

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Last month, which seems like a millennium ago, the group said it’s experiencing “strong demand for key products” including UHT dairy and plant beverages and cereals and snacks. Further, the company said it would be able to continue to supply domestic and export markets; namely its retailer customer base. Its shares spiked over 20% on the news to as high as $5.10 but have come back on market-wide selling.

The problems in the food supply chain are in domestic groups importing products because they are having difficulty getting access to labelling and brand packaging. Freedom do not seem to have these issues, as far as we are aware.

What it does have is debt of almost $200 million and climbing, having spent well over $700m on a number of initiatives, including upgrading its UHT dairy processing plant in Shepparton. There is no disclosure of debt covenants, but based on similar companies we think Freedom has enough room to move.

The specialist pharmaceutical company Medical Developments (MVP) is on the riskier side compared to the other two, but is still a chance of achieving similar market penetration in non-opioid pain relief around the world that it has achieved in Australia, with its famed Green Whistle aka Penthrox.

Who doesn’t need a bit of pain relief right now?

Last month, which seems like a millennium ago, the group said it’s experiencing “strong demand for key products” including UHT dairy and plant beverages and cereals and snacks. Further, the company said it would be able to continue to supply domestic and export markets; namely its retailer customer base. Its shares spiked over 20% on the news to as high as $5.10 but have come back on market-wide selling.

The problems in the food supply chain are in domestic groups importing products because they are having difficulty getting access to labelling and brand packaging. Freedom do not seem to have these issues, as far as we are aware.

What it does have is debt of almost $200 million and climbing, having spent well over $700m on a number of initiatives, including upgrading its UHT dairy processing plant in Shepparton. There is no disclosure of debt covenants, but based on similar companies we think Freedom has enough room to move.

The specialist pharmaceutical company Medical Developments (MVP) is on the riskier side compared to the other two, but is still a chance of achieving similar market penetration in non-opioid pain relief around the world that it has achieved in Australia, with its famed Green Whistle aka Penthrox.

Who doesn’t need a bit of pain relief right now?

Last month, which seems like a millennium ago, the group said it’s experiencing “strong demand for key products” including UHT dairy and plant beverages and cereals and snacks. Further, the company said it would be able to continue to supply domestic and export markets; namely its retailer customer base. Its shares spiked over 20% on the news to as high as $5.10 but have come back on market-wide selling.

The problems in the food supply chain are in domestic groups importing products because they are having difficulty getting access to labelling and brand packaging. Freedom do not seem to have these issues, as far as we are aware.

What it does have is debt of almost $200 million and climbing, having spent well over $700m on a number of initiatives, including upgrading its UHT dairy processing plant in Shepparton. There is no disclosure of debt covenants, but based on similar companies we think Freedom has enough room to move.

The specialist pharmaceutical company Medical Developments (MVP) is on the riskier side compared to the other two, but is still a chance of achieving similar market penetration in non-opioid pain relief around the world that it has achieved in Australia, with its famed Green Whistle aka Penthrox.

Who doesn’t need a bit of pain relief right now?

Richard Hemming is Editor of Under the Radar Report (AFSL 409518). All prices and analysis at 2 April 2020. This information contained on this website is general information only, which means it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether a particular recommendation is appropriate for your needs before acting on it, and we recommend seeking advice from a financial adviser or stockbroker before making a decision. All information displayed on the website, is subject to change without notice. UTRR does not give any representation or warranty regarding the quality, accuracy, completeness or merchantability of the information or that it is fit for any purpose. The content on this website has been published for information purposes only and any use of or reliance on the information on this website is entirely at your own risk. To the maximum extent permitted by law, UTRR will not be liable to any party in contract, tort (including for negligence) or otherwise for any loss or damage arising either directly or indirectly as a result of any act or omission in reliance on, use of or inability to use any information displayed on this website. Where liability cannot be excluded by law then, to the extent permissible by law, liability is limited to the resupply of the information or the reasonable cost of having the information resupplied. No part of UTRR's publications may be reproduced in any manner, and no further dissemination of its publications is permitted without the express written permission of Under the Radar Report Pty Ltd. Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities.