Brexit = Fear = Opportunities. Would love to hear your thoughts on what to buy...now or after the vote.

Friday, Jun 17 2016 by
9

The old investing adage ""buy on the sound of cannons, sell on the sound of trumpets" basically advises to buy when things are uncertain, as in war time and sell on the conclusion of the war as peace time breaks out.


Now Brexit may well have some pretty profound challenges for the UK economy in the short term if we vote to leave. Also even if a Leave vote doesnt actually affect the economy I think the stock markets will see a wave of selling of domestic cyclicals like retailers and housebuilders. Leave should also raise the spectre of the European Union seeing more seccessionist demands from places like Catalonia, emboldened by the Britsh vote.

We can all get very bearish, but uncertainty almost always means opportunity.

Want I want to is profit from the situation if we choose to remain or leave.

Here are a few ideas I have had



Vote Leave
Sell / Short Peripheral European Banks.  I dont think this is a crowded trade, so would look to put this on. Or maybe buy a long dated out of the money put on the european banks index 
Buy GBP vs Euro (on the assumption that the Euro is now seen a basket case and is more likely to split up)
Buy UK listed global staples eg Unilever, BAT if they fall in sympathy with the wider market, but hedge myself by shorting more expensive US listed staples eg Colgate etc
Buy UK Exporters, especially those that sell to the US where i expect the USD to strengthen thus giving a pricing advantage to UK exporters. Ideas are pretty limited but Portmeiron caught my eye. This was THE trade post our exit from the ERM in 1992. Any good UK exporters ?
I think I would short UK housebuilders on the highest valuations. Anyone near 2x P/TNAV is toast in my eyes eg Berkeley Group (LON:BKG)...and thats even after the recent falls. I think this sector is v well owned still by fund managers.
Meat processor £CWK looks interesting and any fall in that shareprice would be a buy. I am told numbers still look conservative, so room for further upgrades, the balance sheet is in great shape and our consumption of Pork and Poultry wont really change if we vote to leave.



Vote Stay

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Portmeirion Group PLC is a United Kingdom-based company, which is engaged in providing ceramic tableware, cookware, giftware and tabletop accessories. The Company has five brands: Portmeirion, Spode, Royal Worcester, Pimpernel and Wax Lyrical. The Company's segments include UK and US operations. Portmeirion offers tableware and gifts with collections, such as Sophie Conran for Portmeirion and Ted Baker collection. Spode brand includes Blue Italian, Blue Room and Christmas Tree. Royal Worcester is engaged in providing porcelain tableware and cookware collections. Pimpernel provides placemats, coasters, trays and accessories. Pimpernel also includes Wrendale Designs collection, which includes placemats, coasters, trays, ceramic and melamine gift sets. Wax Lyrical offers fragranced candles and reed diffusers. The Company caters to markets, such as United States, the United Kingdom, South Korea, India, Taiwan and Thailand. more »

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Cranswick plc is a United Kingdom-based supplier of food products. The Company operates through Foods segment, which is engaged in the manufacture and supply of food products to the United Kingdom grocery retailers, the food service sector and other food producers. The Company provides a range of pork, gourmet sausages, cooked meats, cooked poultry, charcuterie, hand-cured and air-dried bacon and gourmet pastry products through retail, food servicing and manufacturing channels. The Company's brands include Bodega, Woodall's, Simply Sausages and Yorkshire Baker. The Company operates from 16 production facilities in the United Kingdom. The Company also owns its own pig breeding and rearing operations. It also owns chicken supply chain, including a feed mill, hatchery and broiler farms. From its Bury, the Company manufactures and distributes foods from Europe, using packaging formats and flavor combinations. more »

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Unilever PLC is a fast-moving consumer goods (FMCG) company. The Company's segments include Personal Care, which primarily includes sales of skin care and hair care products, deodorants and oral care products; Foods, which primarily includes sales of soups, bouillons, sauces, snacks, mayonnaise, salad dressings and margarines; Home Care, which primarily includes sales of home care products, such as powders, liquids and capsules, soap bars and a range of cleaning products, and Refreshment, which primarily includes sales of ice cream and tea-based beverages. The Company's geographical segments include Asia/AMET/RUB, The Americas and Europe. Its brands include Axe, Dirt is Good (Omo), Dove, Hellmann's, Knorr, Lipton, Lux, Magnum, Rexona, Sunsilk and Surf. The Company operates in more than 100 countries, selling its products in more than 190 countries. The Company operates approximately 310 factories in over 70 countries. more »

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4 Posts on this Thread show/hide all

Carey Blunt 17th Jun '16 1 of 4

There was a similar thread from before so i'll repeat my post from that.....

I would be interested in knowing if anyone has a more considered Quant view to this question of what to buy as I had been thinking about strategy around this.

I think i'm inclined to buy businesses that people say are "always expensive" which have come off by say 5% over a period of turmoil rather than buy companies which have come down by 20% and which now look like bargains in comparison with their recent high (lets call them "sudden bargains").
With this approach I think I am favouring quality over value and investing over trading.

Assuming that there is a recovery over a period of turmoil then possibly this will mean that I miss out on bigger return as the 20% closes up in the "Sudden bargains" but my argument would be that the return to pre-turmoil prices might be all that I make over a 1 year horizon while the "always expensive" shares would close their 5% gap and then go on to make a further 20% just due to being great companies which everyone wants.

Its just a theory but would be interested in knowing if we can test it at all using Stockopedia stats.

Maybe there is a strategy that analyses daily the fall of stock prices over a set "period of turmoil" that is known about in advance, i.e. a run up to an election or in this case the referendum. For Brexit we could pick between 6th June running up to the 23rd.
The analysis would exclude shares that have reported during that period and then look for shares that have dropped the least in comparison with a benchmark. These stocks that hold up under pressure must be high market conviction stocks which most people have decided to continue to hold and these should be what we should try and buy into?

Ideally I would then track them over a further year to see if the "Sudden Bargains" outperformed the "always expensive" and which won over a longer time horizon.

Alternatively is there just a way to check how high stockrank shares do in a period of turmoil against low stock ranks? Any ideas Ed?

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vik2001 17th Jun '16 2 of 4

some defensive stocks such as Hilton Foods, Treatt are looking cheap with the drops, so might keep a eye on them to buy back in

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Richard Goodwin 18th Jun '16 3 of 4

Many of the engineers are exporters, Renishaw Renishaw (LON:RSW) is always worth keeping an eye on albeit with far eastern issues at present.

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VegPatch 29th Jun '16 4 of 4
2

FWIW I think the EU will have more protest votes over the summer, more migration issues and the treat of referenda will stalk a number of member states.
Also the UK should have more certainty by September as we have a new PM in place
Therefore I think the Euro has a high chance of weakening vs GBP.
I have bought December 16 puts on EURGBP with an 81 strike and 79 strike.

Was about to sign off with "its all fun and games", but it really isnt at the moment!


only my thoughts....please dont constitute them advice

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