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OFFON
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A selection of British stocks to play the Brexit game

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10/16/2019 | 12:26pm 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 LIMITED 3.52% 317.745 Delayed Quote.44.68%
ASHTEAD GROUP PLC -1.93% 2842 Delayed Quote.20.05%
AT HOME GROUP INC. -1.95% 21.41 Delayed Quote.297.27%
BALFOUR BEATTY -2.24% 227.2 Delayed Quote.-11.09%
BERKSHIRE HATHAWAY INC. -0.52% 311363 Delayed Quote.-7.91%
BODYCOTE PLC -3.73% 671 Delayed Quote.-26.79%
BREWIN DOLPHIN HOLDINGS PLC -2.29% 235 Delayed Quote.-35.42%
BRITISH AMERICAN TOBACCO PLC -2.37% 2513.5 Delayed Quote.-20.33%
CLIPPER LOGISTICS PLC -0.33% 447 Delayed Quote.55.86%
CLS HOLDINGS PLC -1.55% 191 Delayed Quote.-35.66%
COCA-COLA HBC AG -3.42% 1889.5 Delayed Quote.-23.72%
COSTAIN GROUP PLC -2.55% 36.35 Delayed Quote.-76.60%
CREST NICHOLSON HOLDINGS PLC -5.37% 222 Delayed Quote.-45.67%
DEVRO PLC -1.55% 152.6 Delayed Quote.-13.12%
DIAGEO PLC 0.13% 2603.5 Delayed Quote.-18.76%
DIALIGHT PLC 1.64% 310 Delayed Quote.29.24%
DRAX GROUP PLC -0.94% 295.6 Delayed Quote.-4.97%
EURO / BRITISH POUND (EUR/GBP) -0.24% 0.90485 Delayed Quote.7.35%
FAR EAST CONSORTIUM INTERNATIONAL LIMITED 1.36% 2.23 End-of-day quote.-41.47%
FDM GROUP (HOLDINGS) PLC -2.44% 999 Delayed Quote.-0.97%
FRESENIUS MEDICAL CARE AG & CO. KGAA 0.41% 68.98 Delayed Quote.4.15%
GALLIFORD TRY PLC -6.23% 74.23 Delayed Quote.-48.98%
GEM CO., LTD. 0.62% 4.84 End-of-day quote.-0.62%
GEM DIAMONDS LIMITED -0.55% 36.5 Delayed Quote.-28.18%
GLENCORE PLC -3.43% 160.54 Delayed Quote.-29.36%
GREAT PORTLAND ESTATES PLC -3.46% 590.8 Delayed Quote.-28.84%
HOSTELWORLD GROUP PLC -3.85% 50 Delayed Quote.-58.40%
HUNTSWORTH PLC 0.00% 107.5 End-of-day quote.32.06%
INTERNATIONAL PERSONAL FINANCE PLC -4.36% 63.6 Delayed Quote.-58.70%
JUST GROUP PLC -4.50% 43.28 Delayed Quote.-42.63%
KELLER GROUP PLC -3.86% 548 Delayed Quote.-24.00%
LONDON BRENT OIL 1.78% 41.06 Delayed Quote.-37.71%
LOUNGERS PLC -0.69% 144.5 Delayed Quote.-31.04%
NCC AB (PUBL) -0.34% 147.5 Delayed Quote.-3.39%
PLUS500 LTD. -8.17% 1488.5 Delayed Quote.82.96%
PREMIER INVESTMENTS LIMITED -0.50% 21.77 End-of-day quote.16.04%
PREMIER, INC. -1.19% 33.815 Delayed Quote.-9.82%
PUBLIC JOINT STOCK COMPANY ROSNEFT OIL COMPANY -2.20% 4.802 Delayed Quote.-31.88%
PURECIRCLE LIMITED 0.00% 99.5 End-of-day quote.-24.16%
SEVERFIELD PLC 1.82% 56 Delayed Quote.-34.52%
SMS CO., LTD. -0.82% 3015 End-of-day quote.-0.33%
SPEEDY HIRE PLC 0.79% 51 Delayed Quote.-34.29%
SSP GROUP PLC 0.70% 186.8 Delayed Quote.-71.46%
STHREE PLC -0.75% 266 Delayed Quote.-29.29%
STRYKER CORPORATION -0.61% 213.4 Delayed Quote.2.29%
TECHNOGYM S.P.A. -0.08% 5.97 Delayed Quote.-48.45%
TEN ENTERTAINMENT GROUP PLC 2.22% 138 Delayed Quote.-55.30%
TESCO PLC -1.46% 209.2 Delayed Quote.-16.81%
THE GYM GROUP PLC 1.08% 149.4 Delayed Quote.-48.86%
TYMAN PLC -3.05% 270.5 Delayed Quote.2.76%
WALGREENS BOOTS ALLIANCE, INC. -2.20% 36.385 Delayed Quote.-36.89%
WILL GROUP, INC. -1.18% 837 End-of-day quote.-33.15%
WORKSPACE GROUP PLC -0.49% 604 Delayed Quote.-48.91%
XPO LOGISTICS, INC. -0.19% 94.44 Delayed Quote.18.26%
ZOTEFOAMS PLC 0.00% 438 Delayed Quote.-1.57%
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