Keep buying Sainsbury’s: it should recover when Brexit fears prove unfounded
BREXIT is likely to be uppermost in investors’ minds in 2018. Many are likely to be apprehensive about our impending departure from the EU, but Questor believes that an excess of pessimism has already given rise to an array of opportunities for readers to buy undervalued shares.
The evidence that some stocks have been oversold is compelling.
The fact that the FTSE 100 is flirting with record highs disguises a fault line that runs through the stock market, dividing it in two.
This is best illustrated by two new indices produced by a company called Bats. It recently introduced a new rival to the FTSE 100 that also consists of 100 of Britain’s largest listed companies, but it has also split this index into two: one consists of domestically
focused firms that make most of their revenues here, and are seen as likely to suffer as a result of Brexit, while the second group make most of their money internationally.
The graph shows the marked divergence in the performance of these two groups.
In essence, the domestic half of the stock market has drastically underperformed the international half, especially since the EU referendum.
We think this divergence exaggerates the likely effect of Brexit on the British economy and on the firms exposed to it and that as a result there will be bargains to be found among the constituents of Bats’ “Brexit 50” index (officially called the Bats UK Brexit High 50). You can see the full list of constituents at tinyurl. com/brexitstocks.
Questor is not aware of a tracker fund or ETF (exchange-traded fund)