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A selection of British stocks to play the Brexit game

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10/16/2019 | 11:26am EST

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 -0.24% 186.71 Delayed Quote.36.54%
ASHTEAD GROUP PLC 0.30% 2366 Delayed Quote.44.53%
BALFOUR BEATTY 2.17% 235.8 Delayed Quote.-5.42%
BERKSHIRE HATHAWAY INC. -0.16% 330986 Delayed Quote.8.34%
BODYCOTE PLC -0.12% 807.5 Delayed Quote.11.15%
BREWIN DOLPHIN HOLDINGS PLC 0.00% 341 Delayed Quote.5.77%
BRITISH AMERICAN TOBACCO PLC 0.87% 2910.5 Delayed Quote.16.42%
CLIPPER LOGISTICS PLC -0.43% 231 Delayed Quote.2.67%
CLS HOLDINGS PLC 0.20% 246.5 Delayed Quote.16.82%
COCA-COLA HBC AG -0.30% 2359 Delayed Quote.-3.87%
COSTAIN GROUP PLC 1.09% 167.6 Delayed Quote.-46.88%
CREST NICHOLSON HOLDINGS PLC 2.11% 367 Delayed Quote.11.82%
DEVRO PLC 1.14% 160 Delayed Quote.-0.12%
DIAGEO 0.61% 3109 Delayed Quote.11.23%
DIALIGHT PLC -5.46% 303 Delayed Quote.-24.25%
DRAX GROUP PLC 0.21% 281 Delayed Quote.-21.68%
FAR EAST CONSORTIUM INTERNATIONAL LIMITED 1.49% 3.4 End-of-day quote.0.29%
FDM GROUP (HOLDINGS) PLC 3.57% 783 Delayed Quote.5.38%
FRESENIUS MEDICAL CARE AG & CO. KGAA -1.38% 67.16 Delayed Quote.18.57%
GALLIFORD TRY PLC 0.85% 709 Delayed Quote.13.80%
GEM DIAMONDS LIMITED 2.62% 62.6 Delayed Quote.-43.60%
GLENCORE -3.50% 245.5 Delayed Quote.-15.74%
GREAT PORTLAND ESTATES PLC 0.26% 779 Delayed Quote.18.19%
HOSTELWORLD GROUP PLC -0.34% 116.4 Delayed Quote.-42.23%
HUNTSWORTH PLC 3.33% 93 Delayed Quote.-13.89%
INTERNATIONAL PERSONAL FINANCE PLC -1.20% 147.6 Delayed Quote.-28.21%
KELLER GROUP PLC 0.38% 529 Delayed Quote.7.19%
LOUNGERS PLC 0.00% 190 Delayed Quote.0.00%
NCC AB (PUBL) 0.89% 153.55 Delayed Quote.10.45%
PLUS500 LTD. 1.04% 761.2 Delayed Quote.-44.44%
PREMIER INVESTMENTS LIMITED -0.72% 19.38 End-of-day quote.32.70%
PUBLIC JOINT STOCK COMPANY ROSNEFT OIL COMPANY -0.73% 7.05 Delayed Quote.14.08%
PURECIRCLE LIMITED 0.00% 131.2 Delayed Quote.-48.70%
SEVERFIELD PLC -2.34% 75.2 Delayed Quote.6.67%
SMS CO., LTD. 1.28% 2851 End-of-day quote.70.72%
SOPHOS GROUP PLC -0.21% 570.8 Delayed Quote.50.77%
SPEEDY HIRE PLC 0.37% 54.2 Delayed Quote.-8.91%
SSP GROUP PLC 1.25% 647 Delayed Quote.-0.06%
STHREE PLC 0.69% 290 Delayed Quote.1.22%
STRYKER CORPORATION -0.68% 198.42 Delayed Quote.26.58%
TECHNOGYM S.P.A. 0.80% 10.11 End-of-day quote.7.16%
TEN ENTERTAINMENT GROUP PLC 0.00% 267 Delayed Quote.16.67%
TESCO PLC -0.08% 237.7 Delayed Quote.25.04%
TYMAN PLC 1.95% 235 Delayed Quote.0.00%
WALGREENS BOOTS ALLIANCE 5.08% 62.25 Delayed Quote.-8.90%
WORKSPACE GROUP PLC 1.89% 1078 Delayed Quote.35.85%
XPO LOGISTICS, INC. -0.53% 84.19 Delayed Quote.47.60%
ZOTEFOAMS PLC 3.51% 413 Delayed Quote.-41.50%

Anthony Bondain
© MarketScreener.com 2019
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