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A selection of British stocks to play the Brexit game

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10/16/2019 | 11:26am EDT

If Brexit was a song, it would be the Clash's "Should I stay or should I go" or the Beatles' "Hello Goodbye". But what if it was wallet? Liberum had a go at answering this question, and it is quite natural since the broker was born in the heart of the British capital.

 

Brexit is entering its final stretch, or its presumed final stretch, since the United Kingdom's exit from the European Union is taking forever. However, in Brussels and London, everyone seems to have soften their stance. At the time of writing, Michel Barnier and Boris Johnson may be finalizing a compromise while sipping black coffee.

Bank Liberum certainly has Remainers and Brexiters in its clientele. It also certainly would like to be prepared for all eventualities in view of the many missed deadlines on Brexit. The bank asked its floor analysts for two stock selections, one made up of stocks that would benefit from a soft Brexit and the other made up of stocks that would not suffer too much from a hard Brexit. You will notice that there are many mid & small caps in the lists, because the broker has made them his specialty. These securities work if an agreement is reached by the October 31 deadline or if a new deadline is granted to finalize it.

 

Soft Brexit

In the first category, Liberum includes stocks exposed to the strengthening of the pound and the British domestic market. The companies selected :

  • earn more than 50% of their income in GBP
  • have a 12-month PE reduction of at least 10% on the average of the last 5 years
  • have a net debt to EBITDA ratio of less than 2
  • anticipate EPS growth of more than 5%.

And the winners are:

 

Hard Brexit

If hopes of an orderly Brexit were to shatter, investors would have to focus on stocks that would benefit from the decline in the pound and have a high level of international exposure. The companies selected:

  • have more than 40% of their income in USD or EUR
  • have a 12-month PE reduction of at least 10% on the average of the last 5 years
  • have a net debt to EBITDA ratio of less than 2
  • anticipate EPS growth of more than 5%.

And the winners are:

Jefferies analysts also gave their favorite by sector for one or the other scenario, without necessarily meeting the above criteria.

In case of a Soft Brexit: Costain, Barratt, Bellway, Brewin Dolphin, Halfords, Associated British Foods, Britvic, A.G. Barr, Nichols, On the Beach, SSP Group, Ten Entertainment, Loungers, Derwent London, Great Portland, Workspace, CLS.

In case of a Hard Brexit: SMS, Plus500, B&M, Tate & Lyle, Diageo, Reckitt, Coca-Cola HBC, British American Tobacco.

Stocks mentioned in the article
ChangeLast1st jan.
ALIBABA GROUP HOLDING 0.69% 219.55 Delayed Quote.3.51%
ASHTEAD GROUP PLC 4.65% 2610 Delayed Quote.8.12%
BALFOUR BEATTY -0.23% 262.4 Delayed Quote.0.38%
BERKSHIRE HATHAWAY INC. 4.53% 300920 Delayed Quote.-11.39%
BODYCOTE PLC 11.33% 717.5 Delayed Quote.-24.63%
BREWIN DOLPHIN HOLDINGS PLC 2.42% 296.5 Delayed Quote.-20.38%
BRITISH AMERICAN TOBACCO PLC -0.55% 3182.5 Delayed Quote.-1.52%
CLIPPER LOGISTICS PLC 1.72% 295 Delayed Quote.2.52%
CLS HOLDINGS PLC 3.38% 214 Delayed Quote.-29.02%
COCA-COLA HBC AG 3.33% 2164 Delayed Quote.-15.63%
COSTAIN GROUP PLC 0.38% 79.8 Delayed Quote.-49.94%
CREST NICHOLSON HOLDINGS PLC 7.35% 295.2 Delayed Quote.-31.64%
DEVRO PLC 2.53% 170 Delayed Quote.-4.71%
DIAGEO PLC 0.62% 2900 Delayed Quote.-9.39%
DIALIGHT PLC 7.84% 275 Delayed Quote.11.89%
DRAX GROUP PLC 7.19% 238.4 Delayed Quote.-24.08%
FAR EAST CONSORTIUM INTERNATIONAL LIMITED 0.80% 2.52 End-of-day quote.-33.86%
FDM GROUP (HOLDINGS) PLC 1.18% 942 Delayed Quote.-8.90%
FRESENIUS MEDICAL CARE AG & CO. KGAA 1.69% 78.2 Delayed Quote.18.56%
GALLIFORD TRY PLC -0.23% 132.58 Delayed Quote.-14.54%
GEM DIAMONDS LIMITED -5.45% 31.2 Delayed Quote.-38.94%
GLENCORE PLC 6.99% 180.98 Delayed Quote.-23.10%
GREAT PORTLAND ESTATES PLC 2.73% 715 Delayed Quote.-16.86%
HOSTELWORLD GROUP PLC 0.12% 85 Delayed Quote.-32.00%
HUNTSWORTH PLC 0.00% 107.5 Delayed Quote.32.06%
INTERNATIONAL PERSONAL FINANCE PLC 16.43% 66.6 Delayed Quote.-58.39%
KELLER GROUP PLC 4.80% 655 Delayed Quote.-12.67%
LOUNGERS PLC 0.00% 133 Delayed Quote.-36.97%
NCC AB (PUBL) 1.63% 162.5 Delayed Quote.4.37%
PLUS500 LTD. -5.60% 1214 Delayed Quote.37.02%
PREMIER INVESTMENTS LIMITED -1.12% 16.79 End-of-day quote.-10.50%
PREMIER, INC. 0.50% 34.45 Delayed Quote.-9.05%
PUBLIC JOINT STOCK COMPANY ROSNEFT OIL COMPANY 4.39% 5.808 Delayed Quote.-19.42%
PURECIRCLE LIMITED 0.87% 92.4 Delayed Quote.-29.57%
SEVERFIELD PLC 8.36% 70 Delayed Quote.-16.67%
SMS CO., LTD. -0.82% 2671 End-of-day quote.-11.70%
SPEEDY HIRE PLC 4.53% 60 Delayed Quote.-22.08%
SSP GROUP PLC 10.54% 342 Delayed Quote.-47.38%
STHREE PLC 2.66% 270 Delayed Quote.-28.76%
STRYKER CORPORATION 4.52% 207.03 Delayed Quote.-1.39%
TECHNOGYM S.P.A. 1.90% 8.31 Delayed Quote.-29.64%
TEN ENTERTAINMENT GROUP PLC 0.59% 170 Delayed Quote.-43.71%
TESCO PLC -1.47% 227.7 Delayed Quote.-10.78%
TYMAN PLC 2.35% 200 Delayed Quote.-26.34%
WALGREENS BOOTS ALLIANCE, INC. 2.60% 45.35 Delayed Quote.-25.03%
WORKSPACE GROUP PLC -2.47% 770 Delayed Quote.-35.19%
XPO LOGISTICS, INC. 2.39% 83.56 Delayed Quote.2.40%
ZOTEFOAMS PLC 0.27% 374 Delayed Quote.-15.96%

Anthony Bondain
© MarketScreener.com 2019
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