Can anyone advise on obvious quality companies who will increase business due to the lower pound and therefore attractive pricing for exports
Hi Andrew
Remember that there's no guarantee that sterling will stay at this lower level. In particular the euro is itself vulnerable to shocks, there are issues in Greece and Italy as we speak. Another Eurozone crisis could make the UK look like a safe haven. So I would try to avoid exposure to exporters to Europe, or at least hedge the risk there.
There are quite a few UK companies that have significant dollar earnings but you have to balance that increased earnings power against the possibility of a global economic downturn. Also, of course, the share prices of many of these have already moved significantly upwards, the market is very good at discounting known information.
However, to at least partially answer your question, the following is a list of the companies I hold that I believe will benefit from the devaluation of the pound against the dollar: Aggreko (LON:AGK), AVEVA (LON:AVV), ARM Holdings (LON:ARM), Burberry (LON:BRBY), Burford Capital (LON:BUR), Croda International (LON:CRDA), Fidessa (LON:FDSA), Johnson Matthey (LON:JMAT), Laird (LON:LRD), Pearson (LON:PSON), Smith & Nephew (LON:SN.), Victrex (LON:VCT), Weir (LON:WEIR). I'm sure there are others, but this particular group generally have strong balance sheets and also offer the possibility of being acquired if sterling stays low.
Another way of addressing this might be to look at UK companies that benefit from the fall in the pound domestically. My own preferred way of playing that angle is via the pub/hotel groups such as Fuller Smith & Turner (LON:FSTA), Greene King (LON:GNK) and Young & Co's Brewery (LON:YNGN) which should benefit from increased tourism and student accommodation suppliers like Empiric Student Property (LON:ESP) and Watkin Jones (LON:WJG).
But to be honest, I think the above approach is obvious. Doubtless there are companies, particularly smaller ones, which now offer hidden value, the challenge is to find them.
timarr
